H. Rept. 109-407 - 109th Congress (2005-2006)
April 05, 2006, As Reported by the Judiciary Committee

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House Report 109-407 - INTELLECTUAL PROPERTY JURISDICTION CLARIFICATION ACT OF 2006




[House Report 109-407]
[From the U.S. Government Printing Office]



109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     109-407

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



 
      INTELLECTUAL PROPERTY JURISDICTION CLARIFICATION ACT OF 2006

                                _______
                                

 April 5, 2006.--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. 2955]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 2955) to amend title 28, United States Code, to clarify 
that the Court of Appeals for the Federal Circuit has exclusive 
jurisdiction of appeals relating to patents, plant variety 
protection, or copyrights, and for other purposes, having 
considered the same, report favorably thereon with amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     3
Background and Need for the Legislation..........................     3
Hearings.........................................................     6
Committee Consideration..........................................     6
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................................................    13

                             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 ``Intellectual Property Jurisdiction 
Clarification Act of 2006''.

SEC. 2. STATE COURT JURISDICTION.

  Section 1338(a) of title 28, United States Code, is amended by 
striking the second sentence and inserting the following: ``No State 
court shall have jurisdiction over any claim for relief arising under 
any Act of Congress relating to patents, plant variety protection, or 
copyrights.''.

SEC. 3. COURT OF APPEALS FOR THE FEDERAL CIRCUIT.

  Section 1295(a)(1) of title 28, United States Code, is amended to 
read as follows:
          ``(1) of an appeal from a final decision of a district court 
        of the United States, the District Court of Guam, the District 
        Court of the Virgin Islands, or the District Court of the 
        Northern Mariana Islands, in any civil action in which a party 
        has asserted a claim for relief arising under any Act of 
        Congress relating to patents or plant variety protection;''.

SEC. 4. REMOVAL.

  (a) In General.--Chapter 89 of title 28, United States Code, is 
amended by adding at the end the following new section:

``Sec. 1454. Patent, plant variety protection, and copyright cases

  ``(a) In General.--A civil action in which any party asserts a claim 
for relief arising under any Act of Congress relating to patents, plant 
variety protection, or copyrights may be removed to the district court 
of the United States for the district and division embracing the place 
where such action is pending.
  ``(b) Special Rules.--The removal of an action under this section 
shall be made in accordance with section 1446 of this chapter, except 
that if the removal is based solely on this section--
          ``(1) the action may be removed by any party; and
          ``(2) the time limitations contained in section 1446(b) may 
        be extended at any time for cause shown.
  ``(c) Remand.--If a civil action is removed solely under this 
section, the district court--
          ``(1) shall remand all claims that are not within the 
        original or supplemental jurisdiction of the district court 
        under any Act of Congress; and
          ``(2) may, under the circumstances specified in section 
        1367(c), remand any claims within the supplemental jurisdiction 
        of the district court under section 1367.''.
  (b) Conforming Amendment.--The table of sections for chapter 89 of 
title 28, United States Code, is amended by adding at the end the 
following new item:

``1454. Patent, plant variety protection, and copyright cases.''.

SEC. 5. TRANSFER BY COURT OF APPEALS FOR THE FEDERAL CIRCUIT.

  (a) In General.--Chapter 99 of title 28, United States Code, is 
amended by adding at the end the following new section:

``Sec. 1632. Transfer by the Court of Appeals for the Federal Circuit

  ``When a case is appealed to the Court of Appeals for the Federal 
Circuit under section 1295(a)(1), and no claim for relief arising under 
any Act of Congress relating to patents or plant variety protection is 
the subject of the appeal by any party, the Court of Appeals for the 
Federal Circuit shall transfer the appeal to the court of appeals for 
the regional circuit embracing the district from which the appeal has 
been taken.''.
  (b) Conforming Amendment.--The table of sections for chapter 99 of 
title 28, United States Code, is amended by adding at the end the 
following new item:

``1632. Transfer by the Court of Appeals for the Federal Circuit.''.

SEC. 6. EFFECTIVE DATE.

  The amendments made by this Act shall apply to any civil action 
commenced on or after the date of the enactment of this Act.

  Amend the title so as to read:

    A bill to amend title 28, United States Code, to clarify 
that the Court of Appeals for the Federal Circuit has exclusive 
jurisdiction of appeals relating to patents or plant variety 
protection, and for other purposes.

                          Purpose and Summary

    H.R. 2955, the ``Intellectual Property Jurisdiction 
Clarification Act of 2005,'' responds to the decision of Holmes 
Group, Inc., v. Vornado Air Circulation Systems, Inc.,\1\ by 
conferring plenary authority on the U.S. Court of Appeals for 
the Federal Circuit to hear all patent appeals from lower 
courts.
---------------------------------------------------------------------------
    \1\ 535 U.S. 826 (2002).
---------------------------------------------------------------------------

                Background and Need for the Legislation

                ABRIDGED HISTORY OF THE FEDERAL CIRCUIT

    Congress created the Federal Circuit in 1982 by merging the 
Court of Claims and the Court of Customs and Patent Appeals.\2\ 
The history of the enacting legislation reveals that Congress 
believed the merger would reduce overlapping functions between 
the two courts and create greater administrative efficiency 
within the Federal system.\3\ More importantly, patent 
practitioners, academics, and the ``Hruska'' Commission, which 
Congress created to study the Federal appellate structure, 
determined that the regional circuits were doing a poor job of 
developing coherent patent law. Specifically, litigants 
complained that the application of patent law ``. . . to the 
facts of a case often produce[d] different outcomes in 
different courtrooms in substantially similar cases.'' \4\ In 
other words, forum-shopping was rampant, as some circuits were 
regarded as ``pro-patent'' and other circuits as ``anti-
patent.'' \5\
---------------------------------------------------------------------------
    \2\ ``The Federal Court Improvements Act of 1982,'' Pub. L. No. 97-
164.
    \3\ Federal Court Improvements Act of 1981 (S. 1700), S. Rep. No. 
97-275 (November 2, 1981) at 5. Court of Appeals for the Federal 
Circuit Act of 1981 (H.R. 4482), H.R. Rep. No. 97-312 (November 4, 
1981) at 18.
    \4\ Id.
    \5\ H.R. Rep. No. 97-312 at 21 (patentees favored the 5th, 6th, and 
7th circuits).
---------------------------------------------------------------------------
    According to reformists, ``. . . channeling patent cases 
into a single appellate forum would create a stable, uniform 
law and would eliminate forum shopping. Greater certainty and 
predictability would foster technological growth and industrial 
innovation and would facilitate business planning.'' \6\ 
Although most people think of the Federal Circuit as a 
``specialty'' court that handles only patent cases, Congress 
deliberately sought to broaden the court's jurisdiction beyond 
one or two ``types'' of cases. As the House Judiciary Committee 
noted at the time, the Circuit's docket spans a broad range of 
legal issues that includes:
---------------------------------------------------------------------------
    \6\ Dreyfuss, The Federal Circuit: a Case Study in Specialized 
Courts, 64 N.Y.U. L. Rev. 1, 7 (1989). H.R. Rep. No. 97-312 at 22.

        appeals in suits against the government for damages or 
        for the refund of Federal taxes, appeals from the Court 
        of International Trade, appeals from the Patent and 
        Trademark Office, and a few other agency review cases. 
        In addition, the court has jurisdiction over all 
        Federal contract appeals in which the United States is 
        a defendant, over patent appeals from all Federal 
        district courts, and over all appeals from the Merit 
        Systems Protection Board. The Supreme Court reviews 
        Circuit decisions by writ of certiorari.\7\
---------------------------------------------------------------------------
    \7\ H.R. Rep. No. 97-312 at 18.

    Opinions will always vary, but the Federal Circuit is 
probably viewed by most practitioners, academics, and others as 
having largely complied with its mandate to bring stability, 
uniformity, and predictability to patent law.\8\ In fact, one 
leading scholar of the court's operations has observed that:
---------------------------------------------------------------------------
    \8\ See Wagner and Petherbridge, Is the Federal Circuit Succeeding? 
An Empirical Assessment of Judicial Performance, 152 U. PA. L. Rev. 
1104 (2004) (``The new Federal Circuit that is now emerging--a court 
that is more rules-based and consistent--is already having a measurable 
impact on patent jurisprudence.'')

        [a]s a general matter, [the Federal Circuit] has 
        articulated rules that are consistent with the 
        underlying philosophy of patent law and that are easy 
        for the lower courts and the research community to 
        apply. The court has been cognizant of the needs of 
        inventors and has made strides toward shaping the law 
        in a manner that resonates with the practicalities of 
        technology development.\9\
---------------------------------------------------------------------------
    \9\ Dreyfuss at 8. See also p. 24.
---------------------------------------------------------------------------

                       THE HOLMES GROUP DECISION

    In 1992, Vornado Air Circulation Systems, a manufacturer of 
patented fans and heaters, sued a competitor, Duracraft, for 
trade dress infringement, based on a grill design embodied in 
one of Duracraft's fan models. The 10th Circuit ruled for 
Duracraft, holding that Vornado had no protectible trade-dress 
rights in the grill design.\10\
---------------------------------------------------------------------------
    \10\ Vornado Air Circulation Systems, Inc. v. Duracraft Corp., 58 
F. 3d 1498 (1995).
---------------------------------------------------------------------------
    Seven years later, Vornado filed a complaint with the U.S. 
International Trade Commission against Holmes Group, another 
competitor, alleging that the sale of fans and heaters with a 
grill design infringed a Vornado patent as well as its trade-
dress rights previously denied by the 10th Circuit. Holmes 
Group filed a declaratory judgement action in a Kansas district 
court to determine the validity of the trade dress claim. 
Vornado's answer contained a compulsory counterclaim alleging 
patent infringement. The Kansas district court ruled in favor 
of Holmes Group on the trade dress question but stayed 
proceedings on the matter of patent infringement. The court 
determined that the counterclaim would be dismissed as well if 
the remainder of the opinion were upheld on appeal.\11\ Vornado 
then appealed to the Federal Circuit in 2001, which vacated the 
Kansas district court's order and remanded for consideration 
based on an ``intervening'' ruling handed down by the Circuit 
in another case. Holmes Group appealed to the Supreme Court, 
which granted certiorari to determine whether the Federal 
Circuit had jurisdiction to hear the case.
---------------------------------------------------------------------------
    \11\ 93 F. Supp. 2d 114 (Kan. 2000).
---------------------------------------------------------------------------
    The Court ruled that the Federal Circuit lacked 
jurisdiction. The Federal Circuit decision was vacated and the 
case transferred to the 10th Circuit for disposition. Justice 
Scalia, who authored the opinion, based his decision on the 
``well-pleaded complaint'' rule. Most often invoked to 
determine the existence of a Federal question under a general 
jurisdictional statute for U.S. district courts,\12\ the rule 
has also been applied by the Court to Sec. 1338 and patent 
cases. In brief, the rule provides that whether a case ``arises 
under'' patent law ``must be determined from what necessarily 
appears in the plaintiff's statement of his own claim in the 
bill or declaration [i.e., the complaint] . . . [The 
plaintiff's well-pleaded complaint must] establish either that 
Federal patent law creates the cause of action or that the 
plaintiff's right to relief necessarily depends on resolution 
of a substantial question of Federal patent law. . . .'' \13\ 
Justice Scalia cited other authority to dismiss the argument 
that a counter-claim could function as the basis for the 
``arising under'' jurisdiction.\14\ Neither was he persuaded by 
the argument that Sec. 1338 should be interpreted within the 
context of why Congress created the Federal Circuit (i.e., to 
promote national uniformity in patent law).
---------------------------------------------------------------------------
    \12\ 28 U.S.C. Sec. 1331.
    \13\ Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 
809 (1988).
    \14\ E.g., Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987); 
In re Adams, 809 F. 2d 1187, 1188, n. 1 (CA5 1987).
---------------------------------------------------------------------------

                       CRITICISM OF HOLMES GROUP

    The Committee believes Holmes Group contravened the will of 
Congress when it created the Federal Circuit. That is, the 
decision will induce litigants to engage in forum-shopping 
among the regional circuits and State courts. Extending the 
argument, the Committee is concerned that the decision will 
lead to an erosion in the uniformity or coherence in patent law 
that has been steadily building since the Circuit's creation in 
1982.\15\
---------------------------------------------------------------------------
    \15\ See Reines, Report of the Ad Hoc Committee to Study ``Holmes 
Group, Inc. v. Vornado Air Circulation Systems, Inc.,'' The Federal 
Circuit Bar Journal, Vol. 12, No. 4, at 713-28 (September 11, 2002).
---------------------------------------------------------------------------

 PROPOSED LEGISLATIVE FIX REVIEWED AT THE JUNE 28, 2005, SUBCOMMITTEE 
                                HEARING

    The Federal Circuit Bar proposed at the June 28, 2005, 
Subcommittee hearing that Congress ``fix'' Holmes Group by 
amending Sec. 1338(a) as follows (bold-face words represent the 
amendatory insertions):

        The district courts shall have original jurisdiction of 
        any civil action involving any claim for relief arising 
        under any Act of Congress relating to patents, plant 
        variety protections, copyrights, and trademarks. Such 
        jurisdiction shall be exclusive of the courts of the 
        states in patent, plant variety protection, and 
        copyright cases.

    Some Federal Circuit Bar members were concerned, however, 
that this fix might unwittingly expand the removal jurisdiction 
of Federal district courts to the detriment of the States. To 
address this concern, the Bar proposed that the general removal 
statute (28 U.S.C. Sec. 1441) be amended by creating a new 
subsection ``(f)'' that reads as follows:

        A counterclaim, cross-claim, or third party claim 
        asserting a claim for relief arising under any Act of 
        Congress relating to patents, plant variety protection, 
        copyrights and trademarks shall not serve as a basis 
        for removal of a civil action to a district court of 
        the United States.

             CRITICISM OF THE FEDERAL CIRCUIT BAR PROPOSAL

    Arthur Hellman,\16\ who testified at the Subcommittee's 
March 17th hearing, argued that the Federal Bar approach amends 
a core provision of Sec. 1338 that defines the ``original 
jurisdiction'' of district courts, an approach which ``. . . 
runs the risk of unsettling the law in ways that no one can 
fully anticipate.'' \17\ Professor Hellman was especially 
concerned how this solution would impact existing precedents 
governing original and removal jurisdiction of the district 
courts since this language has not been amended for more than 
half a century. He also articulated other concerns about the 
effect this change would have on a Federal statute governing 
supplementary jurisdiction.
---------------------------------------------------------------------------
    \16\ Sally Ann Semenko Endowed Chair and Professor, University of 
Pittsburgh School of Law.
    \17\ See ``Holmes Group,'' the Federal Circuit, and the State of 
Patent Appeals: Hearing Before the Subcomm. on Courts, the Internet, 
and Intellectual Property of the House Comm. on the Judiciary, 109th 
Cong., 1st Sess., 40 (Serial No. 109-7) ( March 17, 2005) (statement of 
Professor Arthur Hellman).
---------------------------------------------------------------------------
    Following the hearing, the Subcommittee received 
correspondence from other academics and practitioners with 
backgrounds in Federal jurisdiction and patent law.\18\ They 
agreed with Professor Hellman's analysis and maintained that 
his ``fix'' (in effect, the text of H.R. 2955)--in contrast to 
the Federal Bar approach--directly solves the problem created 
by the Holmes Group decision. The Committee agrees and endorses 
this approach.
---------------------------------------------------------------------------
    \18\ Letter from Professor Thomas D. Rowe, Duke University School 
of Law, to Representatives Lamar Smith and Howard Berman (April 22, 
2005); letter from Associate Professor Christopher Cotropia, Tulane Law 
School, to Representative Lamar Smith (March 28, 2005); letter from 
Professor Daniel J. Meador, University of Virginia School of Law, to 
Representative Lamar Smith (April 19, 2005); letter from Professor 
Richard H. Seamon, University of Idaho College of Law, to 
Representatives Lamar Smith and Howard Berman (May 2, 2005); letter 
from James B. Gambrell, Esq., to Representatives Lamar Smith and Howard 
Berman (May 2, 2005); letter from Elizabeth I. Rogers, Esq., to 
Representatives Lamar Smith and Howard Berman (May 3, 2005).
---------------------------------------------------------------------------

                                Hearings

    On March 17, 2005, the Committee's Subcommittee on Courts, 
the Internet, and Intellectual Property held 1 day of related 
hearings on ``Holmes Group, the Federal Circuit, and the State 
of Patent Appeals.'' Testimony was received from the following 
witnesses: Edward R. Reines, Esq., Weil, Gotshal, & Manges; 
Professor Arthur D. Hellman, University of Pittsburgh School of 
Law; Sanjay Prasad, Chief Patent Counsel, Oracle Corporation; 
and Meredith Martin Addy, Esq., Brinks, Hofer, Gilson, & Lione. 
Further, seven individuals and organizations submitted 
additional materials.

                        Committee Consideration

    On June 28, 2005, the Subcommittee on Courts, the Internet, 
and Intellectual Property met in open session and ordered 
favorably reported the bill H.R. 2955 by voice vote, a quorum 
being present. On March 2, 2006, the full House Committee on 
the Judiciary met in open session and ordered favorably 
reported the bill H.R. 2955 with an amendment 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. 2955.

                      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. 2955, 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, March 17, 2006.
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. 2955, the 
Intellectual Property Jurisdiction Clarification Act of 2006.
    If you wish further details on this estimate, we will be 
pleased to provide them.
    The CBO staff contacts are Gregory Waring (for Federal 
costs), who can be reached at 226-2860, and Sarah Puro (for the 
State and local impact), who can be reached at 225-3220.
            Sincerely,
                                       Douglas Holtz-Eakin.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 2955--Intellectual Property Jurisdiction Clarification Act of 
        2006.
    CBO estimates that implementing H.R. 2955 would have no 
significant impact on the Federal budget and would not affect 
direct spending or receipts. H.R. 2955 would preempt the 
authority of State courts to hear certain patent and trademark 
cases. That provision would constitute an intergovernmental 
mandate as defined in the Unfunded Mandates Reform Act (UMRA). 
CBO estimates, however, that the preemption would impose no 
costs on State, local, or tribal governments and thus would not 
exceed the threshold established in UMRA for intergovernmental 
mandates ($64 million in 2006, adjusted annually for 
inflation). The bill contains no new private-sector mandates as 
defined in UMRA.
    H.R. 2955 would clarify that the Federal courts have 
jurisdiction over claims concerning patents, copyrights, and 
plant variety protection certificates issued by the U.S. 
Department of Agriculture. Further, the bill would state that 
the Federal Circuit has exclusive jurisdiction over appeals of 
the intellectual property decisions of the district courts. 
Finally, H.R. 2955 would allow removal of certain cases from 
the State courts to the district courts. Based on information 
from the Administrative Office of the U.S. Courts, CBO 
estimates that the bill would not impose additional costs on 
the Federal courts because the impact of these clarifications 
on the Federal court's caseloads would be insignificant.
    The CBO staff contacts for this estimate are Gregory Waring 
(for Federal costs), who can be reached at 226-2860, and Sarah 
Puro (for the State and local impact), who can be reached at 
225-3220. This estimate was approved by Peter H. Fontaine, 
Deputy Assistant Director for Budget Analysis.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
Rule XIII of the Rules of the House of Representatives, the 
goal of H.R. 2955 is to ensure that State courts will not 
adjudicate any claim for relief arising under any Act of 
Congress pertaining to patents, plant variety protection, or 
copyrights. In addition, H.R. 2955 clarifies that the Federal 
Circuit, not the regional circuit courts, is the appropriate 
body to adjudicate any appeal from a final decision of a 
Federal trial court in which a party has asserted a claim for 
relief arising under any Act of Congress relating to patents or 
plant variety protection. The Committee will evaluate the 
efficacy of H.R. 2955, once enacted, by monitoring whether 
patent appeals are being decided by the Federal Circuit as 
distinct from State courts or the regional circuits.

                   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 art. I, Sec. 8 of the Constitution.

               Section-by-Section Analysis and Discussion

    The following discussion describes the bill as reported by 
the Committee.
Sec. 1. Short title.
    This Act may be cited as the ``Intellectual Property 
Jurisdiction Clarification Act of 2005.''
Sec. 2. State court jurisdiction.
    Section 1338(a) of title 28 of the U.S. Code confers 
original jurisdiction on U.S. district courts to adjudicate 
civil actions pertaining to ``patents, plant variety 
protection, [and] copyrights. . . .'' To prevent State courts 
from acquiring jurisdiction over patent matters, section 2 
amends the second sentence of Sec. 1338(a) as follows:

        No state court shall have jurisdiction over any claim 
        for relief arising under any Act of Congress relating 
        to patents, plant variety protection, or copyrights.

Sec. 3. Court of Appeals for the Federal Circuit.
    Section 3 amends 28 U.S.C. Sec. 1295 (the statute defining 
Federal Circuit jurisdiction) by giving the court exclusive 
appellate jurisdiction

        of an appeal from a final decision of a [U.S. district 
        court] in any civil action in which a party has 
        asserted a claim for relief arising under any Act of 
        Congress relating to patents or plant variety 
        protection.

Sec. 4. Removal.
    Section 4 creates a new Federal removal statute (28 U.S.C. 
Sec. 1454) that would allow patent issues in a State action to 
be removed to U.S. district court while other State or 
supplementary matters would be remanded back.
Sec. 5. Transfer by Court of Appeals for the Federal Circuit.
    During the Committee's consideration of H.R. 2955 on March 
2, 2006, Representative Smith of Texas and Representative 
Conyers of Michigan offered an amendment to ensure that 
litigants do not use the legislation to file frivolous patent 
suits to avoid adjudicating antitrust and other non-patent 
disputes in the regional circuits. Section 5 consists of the 
text of the Smith-Conyers amendment.
    As noted, Congress envisioned the Federal Circuit would be 
much more than a ``specialty'' court that only adjudicates 
patent appeals. The 1981 bill creating the Court and the 
accompanying House and Senate Reports reveal that the Federal 
Circuit has jurisdiction over many areas of the law, including 
appeals in suits against the government for damages or for the 
refund of Federal taxes; appeals from the Court of 
International Trade; appeals from the Patent and Trademark 
Office; and other agency review cases. In addition, the court 
has jurisdiction over all Federal contract appeals in which the 
United States is a defendant, over patent appeals from all 
Federal district courts, and over all appeals from the Merit 
Systems Protection Board.
    The House Report specifically noted that many of these 
cases would necessarily bring matters pertaining to fraud, 
misuse, inequitable conduct, antitrust violations, and unfair 
competition before the Federal Circuit. The Court's 
jurisdiction was always intended to be broad and diverse, with 
an emphasis on patent law based on the highly technical nature 
of that subject matter. It is therefore inevitable and 
appropriate, given the legislative history of the Court, that 
the Federal Circuit handle some non-patent business disputes 
when related and non-frivolous patent claims are present.
    Moreover, the 1981 House and Senate Judiciary Committee 
Reports addressed the specter of litigants filing frivolous 
patent suits to avoid regional-circuit adjudication of 
antitrust and other matters. Both Reports specifically state 
that ``immaterial, inferential, and frivolous allegations of 
patent questions will not create jurisdiction'' in the Federal 
Circuit; and cited a number of Federal Rules \19\ that judges 
may invoke to inhibit frivolous litigation. In fact, the 
Federal Circuit itself has taken this admonition to heart, 
quoting the text of the Committee Reports in its opinions, when 
relevant.
---------------------------------------------------------------------------
    \19\ Fed. R. Civ. P. 11, 13(i), 42(b), and 54(b).
---------------------------------------------------------------------------
    These safeguards provide a robust deterrent to those 
litigants wishing to gain access to the Federal circuit by 
filing frivolous patent claims. But given the importance of 
combating frivolous litigation and the value of having 
antitrust and other non-patent matters adjudicated before the 
regional circuits, the Committee adopted section 5 of H.R. 
2955.
    The text creates a new Sec. 1632 to title 28 of the U.S. 
Code that requires the Federal Circuit to transfer a patent 
case to the appropriate regional circuit when ``. . . no claim 
for relief arising under any Act of Congress relating to 
patents or plant variety protection is the subject of an appeal 
by any party. . . .''
    The Committee is also interested in the choice-of-law 
decision-making of a court when non-patent matters are at 
stake. A case may be heard on appeal by either the Federal 
Circuit or a regional circuit, depending upon whether a claim 
for relief under the patent laws is the subject of any appeal. 
It may not therefore be clear to the litigants or the trial 
court which law should apply, where there is a difference 
between the law of the regional circuit and the law of the 
Federal Circuit. That dilemma should be limited, however, since 
the Federal Circuit ordinarily approaches claims under other 
laws, such as antitrust law, as would a court of appeals in the 
circuit of the district judge whose judgment is being 
reviewed.\20\
---------------------------------------------------------------------------
    \20\ Bowers v. Baystate Technologies, Inc., 320 F.3d 1317, 1322 
(Fed. Cir. 2003).
---------------------------------------------------------------------------
    The Federal Circuit should develop and apply its own law 
rather than regional circuit law, in order to create uniformity 
in the law applied to patent issues, only to the questions that 
are unique to patent law, such as whether and to what extent 
patent law preempts or conflicts with other causes of action, 
or where there are allegations that conduct in the procurement 
or enforcement of a patent is sufficient to strip a patentee of 
immunity from the antitrust laws.\21\
---------------------------------------------------------------------------
    \21\ Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 
1360 (Fed. Cir. 1999); Nobelpharma AB v. Implant Innovations, Inc., 141 
F.3d 1059 (Fed. Cir. 1998).
---------------------------------------------------------------------------
    Sec. 6. Effective date.
    The amendments made by this Act shall apply to any civil 
action commenced on or after the date of enactment of this Act.

         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 28, UNITED STATES CODE



           *       *       *       *       *       *       *
PART IV--JURISDICTION AND VENUE

           *       *       *       *       *       *       *


CHAPTER 83--COURTS OF APPEALS

           *       *       *       *       *       *       *


Sec. 1295. Jurisdiction of the United States Court of Appeals for the 
                    Federal Circuit

  (a) The United States Court of Appeals for the Federal 
Circuit shall have exclusive jurisdiction--
          [(1) of an appeal from a final decision of a district 
        court of the United States, the United States District 
        Court for the District of the Canal Zone, the District 
        Court of Guam, the District Court of the Virgin 
        Islands, or the District Court for the Northern Mariana 
        Islands, if the jurisdiction of that court was based, 
        in whole or in part, on section 1338 of this title, 
        except that a case involving a claim arising under any 
        Act of Congress relating to copyrights, exclusive 
        rights in mask works, or trademarks and no other claims 
        under section 1338(a) shall be governed by sections 
        1291, 1292, and 1294 of this title;]
          (1) of an appeal from a final decision of a district 
        court of the United States, the District Court of Guam, 
        the District Court of the Virgin Islands, or the 
        District Court of the Northern Mariana Islands, in any 
        civil action in which a party has asserted a claim for 
        relief arising under any Act of Congress relating to 
        patents or plant variety protection;

           *       *       *       *       *       *       *


CHAPTER 85--DISTRICT COURTS; JURISDICTION

           *       *       *       *       *       *       *


Sec. 1338. Patents, plant variety protection, copyrights, mask works, 
                    designs, trademarks, and unfair competition

  (a) The district courts shall have original jurisdiction of 
any civil action arising under any Act of Congress relating to 
patents, plant variety protection, copyrights and trademarks. 
[Such jurisdiction shall be exclusive of the courts of the 
states in patent, plant variety protection and copyright 
cases.] No State court shall have jurisdiction over any claim 
for relief arising under any Act of Congress relating to 
patents, plant variety protection, or copyrights.

           *       *       *       *       *       *       *


    CHAPTER 89--DISTRICT COURTS; REMOVAL OF CASES FROM STATE COURTS

Sec.
1441. Actions removable generally.
     * * * * * * *
1454. Patent, plant variety protection, and copyright cases.

           *       *       *       *       *       *       *


Sec. 1454. Patent, plant variety protection, and copyright cases

  (a) In General.--A civil action in which any party asserts a 
claim for relief arising under any Act of Congress relating to 
patents, plant variety protection, or copyrights may be removed 
to the district court of the United States for the district and 
division embracing the place where such action is pending.
  (b) Special Rules.--The removal of an action under this 
section shall be made in accordance with section 1446 of this 
chapter, except that if the removal is based solely on this 
section--
          (1) the action may be removed by any party; and
          (2) the time limitations contained in section 1446(b) 
        may be extended at any time for cause shown.
  (c) Remand.--If a civil action is removed solely under this 
section, the district court--
          (1) shall remand all claims that are not within the 
        original or supplemental jurisdiction of the district 
        court under any Act of Congress; and
          (2) may, under the circumstances specified in section 
        1367(c), remand any claims within the supplemental 
        jurisdiction of the district court under section 1367.

           *       *       *       *       *       *       *


                     CHAPTER 99--GENERAL PROVISIONS

Sec.
1631. Transfer to cure want of jurisdiction.
     * * * * * * *
1632. Transfer by the Court of Appeals for the Federal Circuit.

           *       *       *       *       *       *       *


Sec. 1632. Transfer by the Court of Appeals for the Federal Circuit

  When a case is appealed to the Court of Appeals for the 
Federal Circuit under section 1295(a)(1), and no claim for 
relief arising under any Act of Congress relating to patents or 
plant variety protection is the subject of the appeal by any 
party, the Court of Appeals for the Federal Circuit shall 
transfer the appeal to the court of appeals for the regional 
circuit embracing the district from which the appeal has been 
taken.

           *       *       *       *       *       *       *


                           Markup Transcript



                            BUSINESS MEETING

                        THURSDAY, MARCH 2, 2006

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:00 a.m., in 
Room 2141, Rayburn House Office Building, the Honorable F. 
James Sensenbrenner, Jr. (Chairman of the Committee) presiding.
    [Intervening business.]
    Chairman Sensenbrenner. And last, but not least, the next 
item on the agenda is the adoption of H.R. 2955, the 
``Intellectual Property Jurisdiction Clarification Act of 
2005.'' The Chair recognizes the gentleman from Texas, Mr. 
Smith, the Chairman of the Subcommittee on Courts, the 
Internet, and Intellectual Property, for a motion.
    Mr. Smith. Mr. Chairman, the Subcommittee on Courts, the 
Internet, and Intellectual Property reports favorably the bill 
H.R. 2955 and moves its favorable recommendation to the full 
House.
    Chairman Sensenbrenner. Without objection, H.R. 2955 will 
be considered as read and open for amendment at any point.
    [The bill, H.R. 2955, follows:]
      
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    Chairman Sensenbrenner. The Chair recognizes the gentleman 
from Texas, Mr. Smith, to strike the last word.
    Mr. Smith. Mr. Chairman, let me ask for unanimous consent 
that my opening statement be made a part of the record.
    Chairman Sensenbrenner. Without objection.
    [The prepared statement of Mr. Smith follows:]
 Prepared Statement of the Honorable Lamar Smith, a Representative in 
Congress from the State of Texas, and Chairman, Subcommittee on Courts, 
                the Internet, and Intellectual Property
    Mr. Chairman, the Subcommittee on Courts, the Internet, and 
Intellectual Property reports favorably the bill H.R. 2955 and moves 
its favorable recommendation to the full House.
    Thank you, Mr. Chairman. I move to strike the last word.
    The purpose of H.R. 2955 is to reverse the effect of the Supreme 
Court's decision in Holmes Group v. Vornado Air Circulation Systems. 
The bill confers plenary authority on the U.S. Court of Appeals for the 
Federal Circuit to hear all patent appeals from lower courts.
    As the Subcommittee hearing last March made clear, this is 
consistent with the practice of the Circuit and the expectation of 
litigants prior to 2002, the year Holmes Group was issued.
    By way of background, Congress created the Federal Circuit in 1982 
by merging the Court of Claims and the Court of Customs and Patent 
Appeals.
    The history of the enacting legislation reveals that Congress 
believed the merger would reduce overlapping functions between the two 
courts and create greater administrative efficiency within the federal 
system.
    Patent practitioners, academics, and the ``Hruska'' (HRUS-ka) 
Commission, which Congress created to study the federal appellate 
structure, determined that the regional circuits were doing a poor job 
of developing coherent patent law.
    For instance, litigants complained that the application of patent 
law to the facts of a case often produced different outcomes in 
different courtrooms in substantially similar cases.
    Some circuits were regarded as ``pro-patent'' and other circuits as 
``anti-patent.''
    The solution is to channel patent cases into a single appellate 
forum to create a stable and uniform body of law.
    Greater certainty and predictability fosters technological growth 
and industrial innovation and facilitates business planning.
    Given this backdrop, many practitioners and academics believe 
Holmes Group contravened the will of Congress when it created the 
Federal Circuit.
    Opinions will always vary, but the Federal Circuit is probably 
viewed by most practitioners and others, including all of the witnesses 
at our hearing, as having largely complied with its mandate to bring 
stability, uniformity, and predictability to patent law.
    In light of this background and the record to date, H.R. 2955 cures 
the Holmes Group problem.
    This fix is based on testimony received at the hearing and consists 
of the following provisions:
    First, to prevent state courts from acquiring jurisdiction over 
patent matters, the bill amends the second sentence of Sec. 1338(a) as 
follows: ``No state court shall have jurisdiction over any claim for 
relief arising under any Act of Congress relating to patents, plant 
variety protection, or copyrights.''
    Second, H.R. 2955 amends 28 U.S.C. Sec. 1295 (the statute defining 
Federal Circuit jurisdiction) by giving the court exclusive appellate 
jurisdiction ``of an appeal from a final decision of a [U.S. district 
court] in any civil action in which a party has asserted a claim for 
relief arising under any Act of Congress relating to patents or plant 
variety protection.''
    Finally, H.R. 2955 creates a new federal removal statute that would 
allow patent issues in a state action to be removed to U.S. district 
court while other state or supplementary matters would be remanded 
back.
    This ensures that federal courts will continue to exercise 
exclusive jurisdiction over patent cases as they have since at least 
1836.
    The provision also promotes administrative efficiencies by 
obviating the need for a state litigant to file a second suit to 
address patent claims in federal court.
    In conclusion, H.R. 2955 furthers the original objective of 
Congress when it created the Federal Circuit back in 1982.
    I urge the Members to support the bill and two bipartisan 
amendments that I will offer at the appropriate time.
    I yield back the balance of my time.

    Chairman Sensenbrenner. And without objection, all Members' 
opening statements will be made a part of the record.
    Mr. Smith. And, Mr. Chairman, further I do first because 
the underlying legislation is not controversial; and, second of 
all, I'd like to, as quickly as possible, get to the two non-
controversial amendments.
    Chairman Sensenbrenner. Does the gentleman yield back the 
balance of his time?
    Mr. Smith. I yield back the balance of my time.
    Chairman Sensenbrenner. The gentleman from California, Mr. 
Berman.
    Mr. Berman. Mr. Chairman, I'd like my statement to be 
included in the record.
    Chairman Sensenbrenner. Without objection.
    [The prepared statement of Mr. Berman follows:]
Prepared Statement of the Honorable Howard L. Berman, a Representative 
                in Congress from the State of California
    Mr. Chairman,
    Thank you for scheduling a mark-up of H.R. 2955, the ``Intellectual 
Property Jurisdiction Clarification Act of 2005.''
    Without stability, uniformity and dependability in the patent 
system, the market will not be assured of the high quality patents 
essential to spurring innovation. It was with this idea in mind that we 
created the Federal Circuit.
    In most instances, the creation of the Federal Circuit in 1982 has 
been a boon to innovation. Whereas before patentees engaged in forum 
shopping because of the differences in rulings between regional 
circuits, patentees have now come to rely on the Federal Circuit to 
provide a coherent body of patent law precedent. The judges on the 
court, who are experts in the very complex field of patent law, have 
developed a consistent body of rulings that serve as clear guidance to 
those addressing patent validity and infringement issues.
    However, as a result of the Holmes Group decision, once again, 
alternative forums, such as the regional circuit courts or even state 
courts, can now decide patent issues. The re-entry of the Circuits and 
the entry of state courts into the process of deciding patent law 
issues seems to interfere with the policies Congress sought to advance 
when it created the Federal Circuit. This legislation is designed to 
prevent the inconsistencies that may develop once more by allowing 
multiple forums to hear patent cases.
    The amendments that will be offered today address my reservations 
about this proposal. One is merely a technical amendment which removes 
the erroneous reference to copyright cases being within the exclusive 
jurisdiction of the Federal Circuit. As to the second amendment--I was 
concerned that the Federal Circuit would become a court of first resort 
for appeals of matters outside its exclusive jurisdiction, such as with 
anti-trust cases. The second amendment begins to deal with this issue 
by providing for the transfer of appeals that do not implicate the 
Federal Circuit's function of maintaining uniformity in the patent 
laws.
    In addition, I hope that we are able to clarify through report 
language that the Federal Circuit when compelled to decide an issue not 
subject to its exclusive jurisdiction should apply the regional circuit 
law on that issue.
    The goal of this act and its amendments is to maintain the 
integrity of the patent system. I urge my colleagues to support this 
legislation.
    I yield back.

    Mr. Berman. And I support the legislation if the two non-
controversial amendments pass.
    Chairman Sensenbrenner. Does the gentleman yield back?
    Are there non-controversial amendments?
    Mr. Smith. Mr. Chairman, I have an amendment at the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    Mr. Berman. Can we do them both?
    The Clerk. Mr. Chairman, I have two.
    Chairman Sensenbrenner. Does the gentleman wish to offer 
two amendments en bloc?
    Mr. Smith. Mr. Chairman, I would prefer to take them one at 
a time. The first amendment is number----
    Chairman Sensenbrenner. Okay. The clerk will report the 
amendment.
    Mr. Smith. Which is 031.
    Chairman Sensenbrenner. The clerk will report 031.
    The Clerk. Amendment to H.R. 2955, offered by Mr. Smith of 
Texas and Mr. Conyers of Michigan. Insert the following----
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read.
    [The amendment follows:]
      
      

  
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    Chairman Sensenbrenner. The gentleman from Texas is 
recognized for 5 minutes.
    Mr. Smith. Thank you, Mr. Chairman.
    This amendment addresses the legitimate concerns of the 
gentleman from California, Mr. Berman, and the gentleman from 
Michigan, Mr. Conyers. Congress envisioned the Federal Circuit 
would be much more than a specialty court that only adjudicates 
patent appeals. The 1981 bill creating the court and the 
accompanying House and Senate reports reveal that the Federal 
Circuit has jurisdiction over many areas of the law, including 
appeals in suits against the Government for damages or for the 
refund of Federal taxes, appeals from the Court of 
International Trade, appeals from the Patent and Trademark 
Office, and other agency reviews.
    The amendment before us will ensure that frivolous patent 
cases will not find their way to the Federal Circuit. The text 
creates a new section, 1632, to title 28 that requires the 
Federal Circuit to transfer a patent case to the appropriate 
regional circuit when ``no claim for relief relating to patents 
or plant variety protection is the subject of an appeal by any 
party.'' This means that only legitimate patent claims will be 
considered by the Federal Circuit.
    When a patent claim is non-existent, then the Federal 
Circuit would refer the other issues, including antitrust 
matters, to the appropriate regional circuit for further 
review.
    Mr. Chairman, I urge my colleagues to support the amendment 
and yield back the balance of my time.
    Chairman Sensenbrenner. The question is on Smith non-
controversial amendment 031. 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? The gentleman from Texas, Mr. 
Smith.
    Mr. Smith. Mr. Chairman, I have an amendment, number 032, 
at the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 2955, offered by Mr. Smith of 
Texas and Mr. Conyers of Michigan. Amend the title so as to 
read: ``A bill to amend title 28, United States Code, to 
clarify that the Court''----
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read.
    [The amendment follows:]
      
      

  
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    Chairman Sensenbrenner. The gentleman from Texas is 
recognized for 5 minutes.
    Mr. Smith. Thank you, Mr. Chairman.
    Mr. Chairman, the amendment makes a technical correction to 
the descriptive title of the bill. Basically, it takes out the 
word ``copyrights'' because the bill does not, nor was it 
intended to, confer exclusive jurisdiction on the Federal 
Circuit to adjudicate copyright appeals. This was inadvertent, 
and the amendment simply strikes the reference to 
``copyrights.'' I urge my colleagues to support the amendment 
and yield back.
    Chairman Sensenbrenner. The question is on agreeing to the 
amendment 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 
is agreed to.
    Are there further amendments?
    Ms. Jackson Lee. Mr. Chairman?
    Chairman Sensenbrenner. For what purpose does the 
gentlewoman from Texas seek recognition?
    Ms. Jackson Lee. Strike the last word, speak out of order 
briefly.
    Chairman Sensenbrenner. Is there objection to the 
gentlewoman from Texas speaking out of order?
    [No response.]
    Chairman Sensenbrenner. If not, the gentlewoman from Texas 
is recognized for 5 minutes.
    Ms. Jackson Lee. Thank you, Mr. Chairman. I will just 
simply--to make it in order--say that obviously I support the 
amendment and this bill. I was detained on the floor for the 
drug policy, reauthorizing the Office of National Drug Control 
Policy Act. I believe our staffs had a prior discussion about 
an amendment that I would have offered, but because of those 
discussions, I did not offer it, dealing with the assessment of 
teenage drug use. I believe that is a vital question, and I 
would look forward to my colleagues, Democrats and Republicans, 
working with me, Mr. Chairman, on that amendment as we go to 
the floor.
    We also had an initiative dealing with the tragedy of Tulia 
that had to do with the misuse of high-intensity drug actions. 
That may be more of a challenge to get bipartisan support, but 
I would look forward to working with my colleagues on making 
sure that the High-Intensity Drug Task Forces does not 
negatively or unfairly target communities of color.
    With that, I thank the Chairman and the Committee for their 
indulgence, and I will yield back my time.
    Chairman Sensenbrenner. Are there further amendments to 
H.R. 2955?
    [No response.]
    Chairman Sensenbrenner. If there are none, a reporting 
quorum is present. The question occurs on the motion to report 
the bill H.R. 2955 favorably as amended. All 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 staff is directed to make any technical 
and conforming changes, and all Members will be given 2 days, 
as provided by the House rules, in which to submit additional, 
dissenting, supplemental, or minority views.
    The business noticed on today's schedule having been 
concluded, without objection, the Committee stands adjourned.
    [Whereupon, at 11:01 a.m., the Committee was adjourned.]