H. Rept. 108-425 - COOPERATIVE RESEARCH AND TECHNOLOGY ENHANCEMENT (CREATE) ACT OF 2003108th Congress (2003-2004)

108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-425

======================================================================



 
  COOPERATIVE RESEARCH AND TECHNOLOGY ENHANCEMENT (CREATE) ACT OF 2003

                                _______
                                

 February 24, 2004.--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. 2391]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 2391) to amend title 35, United States Code, to promote 
research among universities, the public sector, and private 
enterprise, having considered the same, reports favorably 
thereon with amendments and recommends that the bill as amended 
do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     1
Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     3
Hearings.........................................................     7
Committee Consideration..........................................     7
Vote of the Committee............................................     7
Committee Oversight Findings.....................................     7
New Budget Authority and Tax Expenditures........................     7
Congressional Budget Office Cost Estimate........................     7
Performance Goals and Objectives.................................     8
Constitutional Authority Statement...............................     8
Section-by-Section Analysis and Discussion.......................     8
Changes in Existing Law Made by the Bill, as Reported............    10
Markup Transcript................................................    11

                             The Amendment

  The amendments are as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Cooperative Research and Technology 
Enhancement (CREATE) Act of 2004''.

SEC. 2. COLLABORATIVE EFFORTS ON CLAIMED INVENTIONS.

    Section 103(c) of title 35, United States Code, is amended to read 
as follows:
    ``(c)(1) Subject matter developed by another person, which 
qualifies as prior art only under one or more of subsections (e), (f), 
and (g) of section 102 of this title, shall not preclude patentability 
under this section where the subject matter and the claimed invention 
were, at the time the claimed invention was made, owned by the same 
person or subject to an obligation of assignment to the same person.
    ``(2) For purposes of this subsection, subject matter developed by 
another person and a claimed invention shall be deemed to have been 
owned by the same person or subject to an obligation of assignment to 
the same person if--
            ``(A) the claimed invention was made by or on behalf of 
        parties to a joint research agreement that was in effect on or 
        before the date the claimed invention was made;
            ``(B) the claimed invention was made as a result of 
        activities undertaken within the scope of the joint research 
        agreement; and
            ``(C) the application for patent for the claimed invention 
        discloses or is amended to disclose the names of the parties to 
        the joint research agreement.
    ``(3) For purposes of paragraph (2), the term `joint research 
agreement' means a written contract, grant, or cooperative agreement 
entered into by two or more persons or entities for the performance of 
experimental, developmental, or research work in the field of the 
claimed invention.''.

SEC. 3. EFFECTIVE DATE.

    (a) In General.--The amendments made by this Act shall apply to any 
patent granted on or after the date of the enactment of this Act.
    (b) Special Rule.--The amendments made by this Act shall not affect 
any final decision of a court or the United States Patent and Trademark 
Office rendered before the date of the enactment of this Act, and shall 
not affect the right of any party in any action pending before the 
United States Patent and Trademark Office or a court on the date of the 
enactment of this Act to have that party's rights determined on the 
basis of the provisions of title 35, United States Code, in effect on 
the day before the date of the enactment of this Act.

    Amend the title so as to read:

      A bill to amend title 35, United States Code, to promote 
cooperative research involving universities, the public sector, 
and private enterprises.

                          Purpose and Summary

    H.R. 2391, the ``Cooperative Research and Technology 
Enhancement (CREATE) Act of 2003,'' responds to the 1997 Oddzon 
\1\ decision of the Federal Circuit Court of Appeals. The 
legislation will ameliorate the effects of the decision by 
clarifying Congress's intent to permit the patenting of 
inventions that result from collaborative or ``team research'' 
in circumstances not permitted under current law. Enactment of 
the CREATE Act will provide collaborative researchers 
affiliated with multiple organizations a statutory ``safe 
harbor'' similar to the one available under the patent law to 
researchers employed by a single organization or who have 
established certain types of legal relationships. In so doing, 
the CREATE Act will foster improved communication among 
researchers, provide additional certainty and structure for 
those who engage in collaborative research, reduce patent 
litigation incentives, and spur innovation and investment.
---------------------------------------------------------------------------
    \1\ Oddzon Products, Inc. v. Just Toys, Inc., et al, 122 F.3d 1396, 
43 U.S.P.Q.2d 1641 (Fed. Cir. 1997).
---------------------------------------------------------------------------

                Background and Need for the Legislation

    Collaborative research among private, public, and non-
profit entities is an essential pillar of the economy of the 
United States.\2\ A 1999 report of the National Research 
Council's Committee on Science, Engineering, and Public Policy 
found that partnerships among industry, academia, and 
governments have contributed significantly to recent 
technological successes in the United States. The report 
recommended strengthening such partnerships in the future.
---------------------------------------------------------------------------
    \2\ ``In 2000, non-profits and universities spent a record $28.1 
billion on research and development much of which involved 
collaborations among private, public, and non-profit entities. The 
positive effects of these collaborations on the U.S. economy are 
substantial. For example, in 2000, sales from products developed from 
inventions that were transferred from university research centers 
resulted in revenues of about $42 billion, and U.S. universities, 
hospitals, and research institutes realized almost $1.2 billion in 
gross license income much of which was used to fund additional 
research.'' Patent Law and Non-Profit Research Collaboration, 2002: 
Hearing Before the Subcomm. on Courts, the Internet, and Intellectual 
Property of the House Judiciary Committee, 107th Cong., 2nd Sess. 60 
(2002) (statement of Carl E. Gulbrandsen, Managing Director of the 
Wisconsin Alumni Research Foundation).
---------------------------------------------------------------------------
    Through legislation, Congress has fostered such cooperative 
research efforts.\3\ In decisions by the U.S. Court of Customs 
and Patent Appeals (CCPA), the predecessor to the Federal 
Circuit, the court ruled that 35 U.S.C. Sec. 103 could be 
interpreted to mean that earlier inventions by individual 
collaborative research team members could render the team's new 
invention obvious and therefore unpatentable.\4\ Concerned this 
result could chill communication among team members, stifle 
cooperative research, and inhibit innovation, Congress enacted 
the Patent Law Amendments of 1984.
---------------------------------------------------------------------------
    \3\ The Bayh-Dole Act and the Stevenson-Wydler Technology 
Innovation Act, each enacted in 1980, are representative of 
Congressional policy in this area. Bayh-Dole expressly articulates that 
one of Congress's policy objectives is ``to promote collaboration 
between commercial concerns and non-profit organizations, including 
universities.'' 35 U.S.C. Sec. 200.
    \4\ See In re Bass, 474 F.2d 1276 (CCPA 1973) and In re Clemens, 
622 F.2d 1029 (CCPA 1980).
---------------------------------------------------------------------------
    Explaining the intent of the new language in Sec. 103 \5\, 
the legislative history provides:
---------------------------------------------------------------------------
    \5\ In 1984, Congress amended 35 U.S.C. Sec. 103 to read:

Subject matter developed by another person, which qualifies as prior 
art only under one or more of subsections (e), (f), and (g) of section 
102 of this title, shall not preclude patentability under this section 
where the subject matter and the claimed invention were, at the time 
the invention was made, owned by the same person or subject to an 
obligation of assignment to the same person.
  Congress redesignated the third sentence of sec. 103 as paragraph (c) 
in the Biotechnological Process Patent Act of 1995, Pub.L. No. 104-41, 
109 Stat. 351 (1995).

        The bill, by disqualifying . . . background [scientific 
        or technical] information [known within an organization 
        but unknown to the public] from prior art, will 
        encourage communication among members of research 
        teams, and patenting, and consequently public 
        dissemination, of the results of ``team research.'' \6\
---------------------------------------------------------------------------
    \6\ See Section-by-Section Analysis: Patent Law Amendments of 1984, 
130 Cong. Rec. 28069, 28071 et seq. (Oct. 1, 1984), reprinted in 1984 
U.S.C.C.A.N. 5827, 5833.

    In amending Sec. 103 to promote collaborative research, 
Congress did not expressly limit the benefit of the new law to 
circumstances in which the collaboration involved researchers 
from within a single organization. Instead, it provided that 
researchers from different organizations who had commonly 
assigned their rights to a single entity could also benefit 
from the ``safe harbor'' created by the law. Research 
collaborations between different companies thus could qualify 
for the safe harbor, providing that the companies involved 
negotiated and resolved a number of issues regarding ownership 
of the patent rights in the invention made as a result of the 
collaboration.
    The effect of the 1984 amendment on inventors from 
different organizations was at the heart of the Court of 
Appeals for the Federal Circuit's 1997 Oddzon decision.\7\ In 
that decision, the court narrowed the possible scope of the 
1984 statute.\8\ The court recognized that it was resolving a 
question that could have serious repercussions for patent 
owners, and invited a Congressional response, stating:
---------------------------------------------------------------------------
    \7\ See supra note 1.
    \8\ See supra note 5.

        It is sometimes more important that a close question be 
        settled one way or another than which way it is 
        settled. We settle the issue here (subject of course to 
        any later intervention by Congress . . .).\9\
---------------------------------------------------------------------------
    \9\ Oddzon, 122 F.3d at 1403.
---------------------------------------------------------------------------

                          THE ODDZON DECISION

    In Oddzon, the Federal Circuit found that in the case of an 
inventive collaboration that involved researchers from more 
than one organization, the sharing of confidential information 
by members of a research team could render an invention 
``obvious'' within the meaning of Sec. 103, and therefore 
unpatentable if the researchers did not have an obligation to 
assign their rights to the invention to a single entity in 
advance of making the invention. The court wrote:

        The statutory language provides a clear statement that 
        subject matter that qualifies as prior art under 
        subsection (f) or (g) cannot be combined with other 
        prior art to render a claimed invention obvious and 
        hence unpatentable when the relevant prior art is 
        commonly owned with the claimed invention at the time 
        the invention was made. While the statute does not 
        expressly state . . . that Sec. 102(f) creates a type 
        of prior art for purposes of Sec. 103, nonetheless that 
        conclusion is inescapable; the language that states 
        that Sec. 102(f) subject matter is not prior art under 
        limited circumstances clearly implies that it is prior 
        art otherwise.\10\
---------------------------------------------------------------------------
    \10\ Id.

    In so ruling, the court addressed the 1984 amendments to 
Sec. 103, and stated ``[t]here is no clearly apparent purpose 
in Congress's inclusion of Sec. 102(f) in the amendment other 
than an attempt to ameliorate the problems of patenting the 
results of team research.'' \11\ The court added, ``while there 
is a basis for an opposite conclusion, principally based on the 
fact that Sec. 102(f) does not refer to public activity, as do 
the other provisions that clearly define prior art, nonetheless 
we cannot escape the import of the 1984 amendment.'' \12\
---------------------------------------------------------------------------
    \11\ Id.
    \12\ Id.
---------------------------------------------------------------------------
    Many view the court's ruling as far-reaching. In essence, 
the court found that secret information that qualifies only 
under Sec. 102(f) could be combined with other information to 
make an invention obvious and nonpatentable where there was no 
common ownership or assignment of the invention and ``subject 
matter'' at issue. The court found this even though the 
information being exchanged was neither publicly known nor 
publicly available. The court's ruling was arguably required by 
the language of the statute. Nevertheless, Oddzon represents a 
significant potential threat to inventors who engage in 
collaborative research and development projects.
    Put another way, the decision created a situation where an 
otherwise patentable invention may be rendered nonpatentable on 
the basis of confidential information routinely exchanged 
between research partners. Thus, parties who enter into a 
clearly defined and structured research relationship, but who 
do not (or cannot) elect to define a common ownership interest 
in or a common assignment of inventions jointly developed, can 
unwittingly create an obstacle to patent protection by simply 
exchanging secret information among themselves. Under the 
court's interpretation of Sec. 103(c), there is no requirement 
that the patent-disqualifying information be publicly disclosed 
or commonly known. The potential ``chilling effect'' for 
communication and open collaboration has troubled many 
academics and researchers.
    The holding created a significant problem for many public-
private research and development projects. Many states and the 
Federal Government operate under laws and practices that tend 
to prohibit the assignment of inventive rights to a private 
sector collaborative partner, as Oddzon putatively requires. 
Instead, the university, state, or Federal Government typically 
retains sole ownership of the invention and licenses its 
applications and commercial exploitation to research partners. 
These technology transfer efforts generate revenue for 
universities and governments, facilitate innovation, and 
encourage efficient commercialization of new technologies. 
Private enterprises benefit by leveraging scarce research 
dollars and by increasing their access to reliable sources of 
basic and advanced research expertise. Consumers benefit from 
innovation and the availability of new technologies.

                             THE CREATE ACT

    In enacting the ``Cooperative Research and Technology 
Enhancement (CREATE) Act of 2003,'' Congress intends to enhance 
the effectiveness and security of patent protection for 
inventions that arise from collaborative arrangements between 
multiple organizations. Specifically, Congress intends that 
subject matter developed by another person, which qualifies as 
prior art only under one or more of subsections (e), (f), and 
(g) of section 102 of title 35, and a claimed invention shall 
be deemed to be owned by the same person, or subject to an 
obligation of assignment to the same person, where specific 
conditions are satisfied. The Act achieves this by eliminating 
the use of certain information and prior art in obviousness 
determinations in the circumstances addressed in the 
legislation.
    The CREATE Act provides a simple means of extending the 
``safe harbor'' provisions of current law that treats 
inventions of a common owner similarly to inventions made by a 
single person. To promote collaborative research within 
organizations, Congress enacted the Patent Law Amendments of 
1984, which, inter alia, exempt ``common owner'' inventors from 
the application of certain types of prior art and information 
in obviousness determinations, subject to the exercise of the 
same double patenting principles that apply when inventions are 
made by a single inventor. By enacting this legislation, 
Congress intends to extend this exemption to ``joint research 
agreement'' inventors, who may represent more than one 
organization, again subject to the same double patenting 
principles. Parties to a joint research agreement who seek to 
benefit from the Act must identify themselves in the 
application for patent or a valid amendment thereto.
    The revised standard will permit one party to a joint 
research agreement who owns an invention to claim the benefit 
of 35 U.S.C. Sec. 103(c) without requiring the potentially 
disqualifying subject matter and the invention be owned by a 
single entity or subject to an obligation of common assignment. 
The revised standard, comparable to current law, requires the 
invention be made after the date of an eligible joint research 
agreement
    Patents issued under this Act shall be enforceable in the 
same manner, to the same extent, and for the same term as when 
patents are issued to a common owner or are subject to common 
assignment. The doctrine of ``obviousness-type double 
patenting,'' a judicial doctrine used by courts to prevent 
patentees from obtaining an unjustifiable extension of the 
amount of time to exercise a patent's right to exclude, shall 
apply to such patents. See, e.g., In re Berg, 140 F.3d 1428, 46 
U.S.P.Q.2d 1226 (Fed. Cir. 1998); In re Goodman, 11 F.3d 1046, 
1052, 29 USPQ2d 2010, 2015 (Fed. Cir. 1993); In re Longi, 759 
F.2d 887, 892-93, 225 USPQ 645, 648 (Fed. Cir. 1985); In re Van 
Ornum, 686 F.2d 937, 943-44, 214 USPQ 761, 766 (CCPA 1982).
    Further, a ``terminal disclaimer'' of the type required 
when double patenting is determined to exist for two or more 
claimed inventions must be filed for any such patent claiming 
the benefit of Sec. 103(c). Such a terminal disclaimer is 
sufficient if it disclaims the ability of the patent owner to 
separately enforce the patent that, but for this Act, would 
have been invalid for obviousness-type double patenting.
    Congress intends that parties who seek to benefit from this 
Act to waive the right to enforce any patent separately from 
any earlier patent that would otherwise have formed the basis 
for an obviousness-type double patenting rejection. Further, 
Congress intends that parties with an interest in a patent that 
is granted solely on the basis of the amendments made pursuant 
to this Act to waive requirements for multiple licenses. In 
other words, the requirements under current law for parties to 
terminally disclaim interests in patents that would otherwise 
be invalid on ``obviousness-type'' double patenting grounds are 
to apply, mutatis mutandis, to the patents that may be issued 
in circumstances made possible by this Act.
    Congress intends the CREATE Act to be applied prospectively 
to any patent granted on or after the date of enactment. The 
prospective nature of the Act's application is not intended to 
prohibit an extension of the benefits of the Act to 
collaborative arrangements that existed prior to enactment and 
that otherwise meet the terms of the Act.
    Congress intends the Act to apply to any reissue patent 
granted on or after the date of enactment, subject to the 
reissue recapture doctrine, which prevents a patentee from 
obtaining claims to subject matter that were surrendered in the 
original application for patent.
    To implement the CREATE Act, the Committee anticipates that 
the U.S. Patent and Trademark Office will promulgate such 
regulations as are necessary including, but not limited to, 
requirements that applicants file amendments and corrections in 
accordance with regulations that the Director may promulgate. 
Subject to such exceptions as the Director may prescribe, a 
failure to comply with such regulations may constitute a waiver 
of benefits under this Act.

                                Hearings

    The Committee's Subcommittee on Courts, the Internet, and 
Intellectual Property held a hearing on H.R. 2391 on June 10, 
2003. Testimony was received from four witnesses, representing 
one organization, with additional material submitted by one 
organization. In addition, the Subcommittee on Courts, the 
Internet, and Intellectual Property held an oversight hearing 
entitled ``Patent Law and Non-Profit Research Collaboration'' 
on March 14, 2002. Testimony was received from four witnesses, 
representing two organizations, with additional material 
submitted two organizations.

                        Committee Consideration

    On July 22, 2003, the Subcommittee on Courts, the Internet, 
and Intellectual Property met in open session and ordered 
favorably reported the bill H.R. 2391, with an amendment, by a 
voice vote, a quorum being present. On January 21, 2004, the 
Committee met in open session and ordered favorably reported 
the bill H.R. 2391 with amendments by voice vote, a quorum 
being present.

                         Vote of the Committee

    In compliance with clause 3(b) of Rule XIII of the Rules of 
the House of Representatives, the Committee notes that there 
were no recorded votes during the Committee consideration of 
H.R. 2391.

                      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.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of Rule XIII of the Rules of the House of 
Representatives 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. 2391, 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, February 4, 2004.
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. 2391, the 
``Cooperative Research and Technology Enhancement (CREATE) Act 
of 2004.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Melissa E. 
Zimmerman, who can be reached at 226-2860.
            Sincerely,
                                       Douglas Holtz-Eakin.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 2391--Cooperative Research and Technology Enhancement (CREATE) Act 
        of 2004.
    H.R. 2391 would make changes to patent law regarding 
collaborative work by researchers from multiple organizations. 
Based on information provided by the United States Patent and 
Trademark Office, CBO estimates that implementing H.R. 2391 
would have an insignificant effect on that agency's spending, 
which is subject to appropriation. Enacting the bill would not 
affect direct spending or revenues.
    H.R. 2391 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of State, local, or tribal 
governments.
    The CBO staff contact for this estimate is Melissa E. 
Zimmerman. This estimate was approved by Robert A. Sunshine, 
Assistant Director for Budget Analysis.

                    Performance Goals and Objectives

    H.R. 2391 does not authorize funding. Therefore, clause 
3(c)(4) of Rule XIII of the Rules of the House of 
Representatives is inapplicable.

                   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 I, section 8 of the Constitution.

               Section-by-Section Analysis and Discussion

    Unless otherwise noted, the following discussion describes 
the bill as reported by the Committee.
    Section 1. Short Title. Section 1 of the bill as introduced 
provides that the Act may be cited as the ``Cooperative 
Research and Technology Enhancement (CREATE) Act of 2003.'' The 
Committee adopted an amendment in the nature of a substitute 
that, among other things, changed the date to 2004.
    Section 2. Collaborative Efforts on Claimed Inventions. 
Section 2 amends Sec. 103(c) of title 35, United States Code, 
to provide collaborative researchers affiliated with more than 
one organization a new way to avail themselves of the ``safe 
harbor'' defined in Sec. 103(c).
    In particular, Sec. 103(c) is amended to add a new 
paragraph that permits reliance on the provisions of 
Sec. 103(c) by parties that have not commonly assigned their 
rights to subject matter and the invention at the time a 
claimed invention was made. It does so by construing the phrase 
``owned by the same person or subject to an obligation of 
assignment'' in newly redesignated Sec. 103(c)(1), to include 
circumstances in which the parties have entered into a 
qualifying joint research agreement before to making the 
invention. The amendments made in this Act do not alter 
existing law governing inventions under Sec. 103(c) where the 
invention and the subject matter at issue are commonly owned or 
subject to an obligation of common assignment.
    A party who seeks to gain the benefit of the amended 
Sec. 103(c) must comply with certain conditions. First, the 
invention and the subject matter (i.e., prior art or 
information qualifying solely under 35 U.S.C. Sec. 102(f)) that 
is being excluded must be owned by, or otherwise subject to the 
control of, one or more of the parties to the joint research 
agreement. While the subject matter being excluded may pre-date 
the joint research agreement, the claimed invention must be 
made after the date of such agreement. Second, the invention 
must arise from work performed by or on behalf of the natural 
or legal persons that are party to the eligible joint research 
agreement. Third, the identities of the parties to the joint 
research agreement must be disclosed in the patent. This 
information may be included in the original application, 
through an amendment to the application, or added by an 
amendment to the patent (e.g., by a certificate of correction) 
pursuant to the amended law. The omission of the names of 
parties to the agreement is not an error that would justify 
commencement of a reissue or reexamination proceeding.
    Thus, by entering into a joint research agreement before 
making the claimed invention, disclosing the names of the 
parties in the patent application or amendment, and ensuring 
that the claimed invention resulted from activities under the 
agreement, subject matter developed by another person and the 
claimed invention will be deemed to be commonly owned.
    Section 2 also defines the term ``joint research 
agreement'' as a ``written contract, grant, or cooperative 
agreement.'' By doing so, Congress does not intend to prescribe 
the specific form of the agreement parties must use to benefit 
from this Act nor to require the writing be contained in a 
single instrument. Congress does intend the writing to 
demonstrate that a qualifying collaboration existed prior to 
the time the claimed invention was made and that the claimed 
invention was derived from activities performed by or on behalf 
of parties that acted within the scope of the agreement.
    The term ``joint research agreement,'' used in section 2 of 
the Act, is not limited to joint research agreements under the 
Bayh-Dole Act (Sec. 200 et seq. of the Patent Code), but also 
includes other governmental or private sector cooperative 
research agreements, development agreements, and other 
transaction agreements, including Government Cooperative 
Research and Development Agreements (15 U.S.C. Sec. 3701a), and 
Department of Defense or National Aeronautics and Space 
Administration (NASA) ``other transaction'' agreements (10 
U.S.C. Sec. 2371, 42 U.S.C. Sec. 2473).
    Section 3. Effective Date. Section 3 provides for 
prospective application of the Act by requiring that the 
amendments apply only to patents granted on or after the date 
of enactment, including a patent from an application filed on 
or before the date of enactment.
    Section 3 contains a special rule that prohibits the 
amendments from: 1) affecting a final decision of a court or 
the United States Patent and Trademark Office (USPTO) rendered 
before the date of enactment; and 2) provides that the 
amendments shall not affect the right of any party in any 
action pending before the USPTO or a court on the date of 
enactment to have their rights determined on the basis of the 
provisions of the patent law in effect on the day before 
enactment. Thus, the CREATE Act will extend benefits of the new 
standard to applications pending at the USPTO before the date 
of enactment but the special rule will ensure that the changes 
made by this Act will not confer rights in existing 
proceedings--including those that involve such applications--
before the USPTO or a court. The rationale is to prevent 
parties in a proceeding who may have conformed their conduct to 
pre-existing patent law from either benefitting from, or being 
punished by, unanticipated revisions to this title.

         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):

              SECTION 103 OF TITLE 35, UNITED STATES CODE

Sec. 103. Conditions for patentability; non-obvious subject matter

    (a)  * * *

           *       *       *       *       *       *       *

    [(c) Subject matter developed by another person, which 
qualifies as prior art only under one or more of subsections 
(e), (f), and (g) of section 102 of this title, shall not 
preclude patentability under this section where the subject 
matter and the claimed invention were, at the time the 
invention was made, owned by the same person or subject to an 
obligation of assignment to the same person.]
    (c)(1) Subject matter developed by another person, which 
qualifies as prior art only under one or more of subsections 
(e), (f), and (g) of section 102 of this title, shall not 
preclude patentability under this section where the subject 
matter and the claimed invention were, at the time the claimed 
invention was made, owned by the same person or subject to an 
obligation of assignment to the same person.
    (2) For purposes of this subsection, subject matter 
developed by another person and a claimed invention shall be 
deemed to have been owned by the same person or subject to an 
obligation of assignment to the same person if--
            (A) the claimed invention was made by or on behalf 
        of parties to a joint research agreement that was in 
        effect on or before the date the claimed invention was 
        made;
            (B) the claimed invention was made as a result of 
        activities undertaken within the scope of the joint 
        research agreement; and
            (C) the application for patent for the claimed 
        invention discloses or is amended to disclose the names 
        of the parties to the joint research agreement.
    (3) For purposes of paragraph (2), the term ``joint 
research agreement'' means a written contract, grant, or 
cooperative agreement entered into by two or more persons or 
entities for the performance of experimental, developmental, or 
research work in the field of the claimed invention.

           *       *       *       *       *       *       *


                           Markup Transcript



                            BUSINESS MEETING

                      WEDNESDAY, JANUARY 21, 2004

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:05 a.m., in 
Room 2141, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
    [Intervening business.]
    Chairman Sensenbrenner. The next item on the agenda is H.R. 
2391, the ``Cooperative Research and Technology Enhancement Act 
of 2003.'' The Chair recognizes the gentleman from Texas, Mr. 
Smith, the Chairman of the Subcommittee on Courts, the 
Internet, and Intellectual Property.
    Mr. Smith. Thank you, Mr. Chairman. The Subcommittee on 
Courts, the Internet, and Intellectual Property reports 
favorably the bill H.R. 2391, with a single amendment in the 
nature of a substitute, and urges its adoption.
    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 before them will be considered as read, considered 
as the original text for purposes of amendment, and open for 
amendment at any point.
    [The amendment in the nature of a substitute follows:]
      
      

  


      
      

  


      
      

  


    Chairman Sensenbrenner. The Chair recognizes the gentleman 
from Texas for a brief 5 minutes to strike the last word.
    Mr. Smith. Mr. Chairman, today the forces of competition 
and the rapid pace of scientific advancement require companies 
and research institutions to engage in an increasing number of 
multidisciplinary research efforts.
    But continued technological progress demands continued 
improvements in communication, coordination, and cooperation 
among researchers.
    To encourage such efforts, Congress enacted a series of 
patent law amendments in 1984. One of these measures was 
codified by 35 USC section 103. This provision created a safe 
harbor for inventions that result from the collaborative 
efforts of researchers by prohibiting the use of nonpublic 
information or secret prior art to deny patent protection.
    Two conditions had to be met. First, such information must 
relate to a prior invention developed by one or more of the 
research partners; and, second, the researchers must have 
exchanged the information voluntarily.
    In the 1997 Oddzon case, the Federal Circuit ruled on the 
scope of this safe harbor. Despite finding ``the existence of a 
basis for an opposite conclusion,'' the court ruled that 
Congress had limited the scope to circumstances where a joint 
invention was developed by researchers within a single 
organization. The court went on to invite Congress to clarify 
its intent, writing ``We settle the issue here, subject of 
course to later intervention by Congress.''
    Put another way, the Oddzon decision created a situation 
when an otherwise patentable invention may be rendered 
nonpatentable on the basis of information routinely exchanged 
between research partners who represent more than one 
institution. Thus, parties who enter into a clearly defined and 
structured research relationship can create obstacles to 
obtaining patent protection by simply exchanging information 
among themselves. There is no requirement that the information 
be publicly disclosed or commonly known. All that is required 
is that the collaborators exchange the information.
    The court attempted to determine the level of protection 
from secret prior art challenges by focusing not on the intent 
of the researchers who comprised the inventive entity, but 
instead simply on whether the researchers represented more than 
one institution. While many believe the court applied the law 
as written by Congress, there is considerable doubt that 
Congress intended this discrimination.
    The CREATE Act, a product of several hearings, much 
discussion and considerable review, is narrowly tailored to 
permit all collaborative researchers to enjoy the same 
protections from the use of secret prior art as are enjoyed by 
those who happen to work for a single enterprise.
    I will offer an amendment in the nature of a substitute 
that makes technical changes to the text reported by the 
Subcommittee. I urge my colleagues to support the legislation.
    Chairman Sensenbrenner. Does anybody wish to make a brief 
statement on the Democratic side?
    Ms. Baldwin. Mr. Chairman.
    Chairman Sensenbrenner. The gentlewoman from Wisconsin is 
recognized for an equally brief 5 minutes.
    Ms. Baldwin. Mr. Chairman, I want to strongly commend this 
process in Ranking Member Berman's absence today. He and the 
Chairman of the Subcommittee were very thorough with this bill. 
I particularly felt that concerns raised among my constituents 
were addressed very well in this process. I commend the bill, 
commend the process, and urge its adoption by this Committee, a 
favorable recommendation by this Committee.
    Mr. Chairman, I yield back the balance of my time.
    Chairman Sensenbrenner. Without objection, all Members may 
insert opening statements at this point in the record.
    [The prepared statement of Mr. Conyers follows:]

Prepared Statement of the Honorable John Conyers, Jr., a Representative 
 in Congress From the State of Michigan, and Ranking Member, Committee 
                            on the Judiciary

    I rise in support of this legislation. I cannot overstate the 
importance of encouraging collaboration when it comes to developing new 
technologies, particularly in the medical field. That is why Congress 
amended the patent laws in the mid-1980's to allow the patenting of 
inventions even when the inventions were not developed by a single 
person.
    Unfortunately, the Federal courts have interpreted the law in a way 
that vitiates our intent in enacting it in the first place. The Federal 
Circuit ruled in the OddzOn case that an inventor's knowledge of 
``secret prior art'' could prevent the issuance of a patent unless the 
inventor basically worked in the same organization that developed the 
prior art.
    This ruling is having a detrimental impact on innovation. Because 
many universities and other non-profits do not enter into the formal 
structures envisioned by OddzOn when they work to develop drugs and 
other technologies, they are losing patent protection and an incentive 
to work together. We will see a decline not only in collaborations but 
also in the development of life-saving drugs and other inventions.
    That is why I am pleased we are marking up this bill, of which I am 
an original cosponsor. H.R. 2391 reiterates the importance of research 
collaborations by allowing them to obtain patent protection without 
entering into formal relationships. This legislation will encourage 
collaboration and spur innovation.
    I urge my colleagues to vote ``Yes'' on this legislation.

    Chairman Sensenbrenner. Are there amendments?
    Mr. Smith. Mr. Chairman, I have an amendment at the desk.
    Chairman Sensenbrenner. Is this an amendment in the nature 
of a substitute?
    Mr. Smith. Yes.
    Chairman Sensenbrenner. The Clerk will report the amendment 
in the nature of a substitute.
    The Clerk. Amendment in the nature of a substitute to H.R. 
2391 offered by Mr. Smith of Texas.
    [The amendment in the nature of a substitute follows:]
      
      

  


      
      

  


      
      

  


    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read and open for amendment at any point.
    The gentleman from Texas is recognized for what I hope will 
be a briefer 5 minutes.
    Mr. Smith. Mr. Chairman, very briefly, this amendment makes 
technical and other changes in the current statute and text 
that was reported by the Subcommittee. The Members have the 
amendment in front of them. If they have any questions, I will 
be happy to address their questions. I believe they are 
noncontroversial.
    Mr. Chairman, I yield back the balance of my time.
    Chairman Sensenbrenner. Are there any amendments to this 
amendment in the nature of a substitute? If not, the question 
is on agreeing to the amendment in the nature of a substitute 
just offered by the gentleman from Texas, Mr. Smith. Those in 
favor will say aye. Opposed no. The ayes appear to have it. The 
ayes have it.
    The amendment in the nature of a substitute is agreed to.
    The Chair notes the presence of a reporting quorum.
    The question now occurs on the motion to report the bill 
H.R. 2391 favorably, as amended. All those in favor will say 
aye. Opposed no. The ayes appear to have it. The ayes have it. 
The motion to report favorably is agreed to.
    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. All Members will be given 2 
days as provided by House rules in which to submit additional 
dissenting supplemental or minority views.
    The Chair would like to thank all of the Members for their 
patience. We have gotten through four bills that are pretty 
meaty in nature. We have seven bills and resolutions left on 
this Committee notice. The Chair will recess this markup until 
10 a.m. on Wednesday next week, January 28. We will conclude 
the rest of the bills on this schedule that day. Members should 
be prepared to be here as long as it takes to get through the 
remaining seven measures on the agenda. I would say that there 
are several measures that are much less controversial. They are 
commemorative in nature, and it is my hope that if we get here 
on time and get to work we will be out of here by lunchtime or 
shortly thereafter. Please be prompt next Wednesday and I think 
we can get another seven measures out and then we can give the 
Rules Committee and the majority leader some of our things to 
schedule.
    The Committee stands recessed.
    [Whereupon, at 2:11 p.m., the Committee was adjourned.]