H.R. 3160 — PREVAIL Act

This section states congressional findings on the importance of reliable patent protections for U.S. innovation, economic growth (including intellectual property-intensive industries that generate tens of millions of jobs and account for more than one-third of gross domestic product), and national security (citing China's exploitation of intellectual property and the U.S. National Security Commission on Artificial Intelligence's recommendations), as well as the unintended consequences of the 2011 patent reforms such as strategic and repetitive post-grant review proceedings that harass patent owners, duplicate district court work, and reduce investment in innovation.

This section amends the provisions governing the Patent Trial and Appeal Board (PTAB)—which reviews patent examiner decisions on appeal, reexamination appeals, derivation proceedings, inter partes reviews, and post-grant reviews (35 U.S.C. 6)—as follows: (1) requires the USPTO Director to prescribe regulations establishing a code of conduct for PTAB members, considering the Code of Conduct for United States Judges; (2) revises the three-member panel requirements to (A) authorize the PTAB (rather than only the PTAB) to grant rehearings, (B) require notation in the record of any panel constitution changes after public disclosure (including pre-disclosure changes), (C) prohibit non-panel supervisory or disciplinary officers from communicating to direct or influence panel merits decisions, and (D) bar PTAB members who decide to institute an inter partes or post-grant review from hearing that review; and (3) updates prior administrative patent judge appointment validations to reference the date of enactment of the Promoting and Respecting Economically Vital American Innovation Leadership Act (rather than "this subsection"), deem appointments by the Director or Secretary valid, expand defenses to challenges for judges performing non-APJ duties before enactment, and apply to the "applicable administrative patent judge."

This section revises inter partes review (IPR) procedures under title 35, United States Code, before the U.S. Patent and Trademark Office (PTO) Patent Trial and Appeal Board (PTAB)—which enable third parties to challenge issued patent validity on prior art grounds—as follows: (1) expands the definition of real party in interest in 35 U.S.C. §311 to include any person making a financial contribution, directly or indirectly, to the IPR preparation or conduct; (2) requires in 35 U.S.C. §312(a)(6) that petitioners certify, and the PTO Director determine, the petitioner is a qualifying nonprofit organization, is or intends to infringe the patent, has declaratory judgment standing, or has been sued for infringement; (3) mandates in new 35 U.S.C. §314(e) a final decision on rehearing of IPR institution decisions within 45 days (extendable by up to 30 days for good cause); and (4) in 35 U.S.C. §315, establishes a single-forum rule barring IPR petitioners, real parties in interest, or privies from maintaining patent validity challenges in federal district court (28 U.S.C. §1338) or International Trade Commission (ITC) proceedings (19 U.S.C. §1337) once IPR is instituted (and vice versa for institution decisions), creates a rebuttable presumption against joinder of time-barred petitioners (who may join only as non-lead parties if an original petitioner remains), and requires notifications of concurrent PTO matters within 30 days. (Thus, the changes limit forum-shopping and repetitive patent validity challenges across PTAB, courts, and ITC import investigations.)

This section amends post-grant review (PGR) procedures under 35 U.S.C. §§321, 324, 325, and 326, which allow third parties to challenge the validity of certain issued patents before the U.S. Patent and Trademark Office (PTO) Director within nine months of issuance. Specifically, it (1) expands the definition of real party in interest under §321(d) to include any person making a financial contribution, directly or through an affiliate, subsidiary, or proxy, to a petitioner's PGR preparation or conduct; (2) requires under §324(f) the PTO Director to decide any rehearing request within 45 days (extendable by up to 30 days for good cause); (3) revises §325 to (A) prohibit under new subsection (c), after PGR institution, any petitioner, real party in interest, or privy from asserting patent invalidity claims, counterclaims, or defenses in federal district court (28 U.S.C. §1338) or International Trade Commission (ITC) proceedings (19 U.S.C. §1337), while barring the Director from rejecting a PGR petition on that basis; (B) under redesignated subsection (e), require coordination of PGR with other PTO proceedings (with stays, transfers, consolidations, or terminations as appropriate) and reject repetitive petitions presenting the same or substantially similar prior art or arguments absent exceptional circumstances; (C) under redesignated subsection (f), estop repeat PGR petitions or related Office proceedings on grounds raised or reasonably raisable previously (with limited exceptions for joinder on newly infringed claims); (D) under new subsection (h), bar PGR institution or maintenance following a final federal court or ITC validity judgment involving the petitioner, real party in interest, or privy; and (4) under §326(a)(5), amend [text cuts off in provided provision]. (Thus, these changes limit forum-shopping between PTO PGR, district courts, and ITC Section 337 investigations, which address unfair import practices including patent infringement.)

This section revises the ex parte patent reexamination process (i.e., a USPTO proceeding allowing any person to request reexamination of issued patent claims based on prior art) as follows: (1) requires reexamination requests under 35 U.S.C. §302 to identify all real parties in interest and certify that reexamination is not barred under new restrictions in §303(d); (2) under §303, strikes a provision in subsection (a) and adds subsection (d) barring reexamination if the request is filed more than one year after the requester, real party in interest, or privy is served with an infringement complaint (defining real party in interest to include those making financial contributions through affiliates, subsidiaries, or proxies) and subsection (e) directing the Director to reject repetitive prior art or arguments (absent exceptional circumstances) or requests using prior USPTO decisions to correct deficient prior filings; and (3) under §304, authorizes the Director to deny reexamination and issue an order if barred under §303(d) or (e).

This section eliminates diversion of fees collected by the U.S. Patent and Trademark Office (USPTO) by amending the funding provisions of 35 U.S.C. 42 to (1) require all such fees to be deposited into and available from a new revolving fund in the Treasury, the United States Patent and Trademark Office Innovation Promotion Fund, without fiscal year limitation; (2) limit patent fees (including surcharges) to USPTO expenses for patent processing and related activities plus a proportionate share of administrative costs, and trademark fees (authorized under the Trademark Act of 1946 [15 U.S.C. 1051 et seq.]) to trademark processing and related activities plus a proportionate share of administrative costs; and (3) make the fund available for all ordinary USPTO operating expenses related to patents and trademarks. (Thus, the USPTO becomes fully funded by its user fees with no transfers to the general Treasury or dependence on annual appropriations.) The amendments take effect on the first day of the first fiscal year beginning on or after enactment, with unobligated balances from the prior Patent and Trademark Office Appropriation Account and Patent and Trademark Fee Reserve Fund transferred to the new fund and the reserve fund terminated after payment of all obligations.

This section revises 35 U.S.C. §123(d) to define "institution of higher education" by reference to 20 U.S.C. §1001(a) (i.e., public or nonprofit postsecondary institutions eligible for federal student aid that admit only high school graduates or equivalents, are state-authorized, provide degree or credit-eligible programs, and are accredited) and to qualify applicants as micro entities eligible for reduced patent fees if they certify that (1) their primary employer is such an institution, (2) they have assigned or are obligated to assign license or ownership rights in the application to such an institution, (3) they are such an institution, or (4) they are a tax-exempt §501(c)(3) organization holding patent title on behalf of such an institution to facilitate technology commercialization.

This section (1) defines "small business concern" by reference to section 3 of the Small Business Act (15 U.S.C. 632); (2) requires the Small Business Administration Administrator, using existing resources, to submit to the Senate Committee on Small Business and Entrepreneurship and the House Committee on Small Business a report within one year of enactment analyzing the impact of patent ownership by and patent infringement civil actions against small business concerns; and (3) amends 35 U.S.C. 41(i) to require the U.S. Patent and Trademark Office Director to make available online and at no charge all patent and trademark information, search tools, databases, informational materials, and training available at the Public Search Facility in Alexandria, Virginia (except to the extent third-party contractor licenses make such provision financially unviable).