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Executive Summary

REP. KASTENMEIER's PROCESS PATENT BILL LIMITS "PRESUMPTION" of infringement to cases involving "new" products or those "directly made from recombinant DNA or hybridoma technology." The legislation (HR 4899) permits courts to make such a presumption, which would shift the burden of proof to defendants, if they find "that a substantial likelihood exists that the product was made by a patented process. In addition, the patent holder has to have "made a reasonable [though unsuccessful] effort to determine the process actually used in the production of the product." The Kastenmeier (D-Wis.) bill differs from measures sponsored by Rep. Moorhead (R-Calif.) in the House and by Sen. Mathias (R-Md.) in the Senate; those bills explicitly provide for presumption in all litigation over imported products made overseas by processes patented in the U.S. An earlier version of HR 4899 was silent on the presumption issue ("The Pink Sheet" April 14, T&G-8). Reportedly, Rep. Brooks (D-Texas) has drafted an amendment to broaden the presumption provision in Kastenmeier's legislation. Kastenmeier's House Judiciary/Courts Subcmte. passed his bill in draft form on May 21, the day before it was formally introduced. Thue subcmte. agreed not to vote on several amendments that had been prepared. Finetuning amendments are expected to be negotiated before the bill reaches the full cmte., which is scheduled to meet in June. Unlike Kastenmeier's earlier bill, HR 4899 defines notice and knowledge of infringement, either of which must be shown for damages to be awarded. "A person has knowledge" of infringement, the bill states, "if that person is aware or has a firm belief that the product was made by a process patented in the U.S." The legislation defines "notice" as "receipt of facts set forth in writing which are sufficient to establish that there is a reasonable likelihood that the product involved was made by an infringing process." Damages may be recovered under the bill only for infringement that occurs after notice or knowledge; damages for infringement occurring "before such knowledge or notice shall be limited to reasonable royalties." Kastenmeier's bill also differs from his earlier measure in its effective date. Whereas the earlier bill applied to patents issued after enactment, HR 4899 applies to products imported after enactment -- the processes by which they were made may have been patented before enactment. Under the bill, it is infringement to import or sell products "directly made" by the patented process. At the subcmte. markup, Moorhead said he would like to change the word "directly" so that the bill applies to products "not materially altered" after being manufactured by the patented process. Kastenmeier noted that the "directly made" provision conforms the bill to corresponding "laws of our trading partners." A trade bill (HR 4800) passed the House on May 22 a 295-115 vote. It contains amendments, previously sponsored by Kastenmeier as HR 4747, to Section 337 under the Tariff Act. The amendments eliminate the need to show injury from alleged patent violations in order to obtain relief. They also limit a "domestic industry" requirement to "significant investment in plant and equipment, significant employment of labor or capital, or substantial investment" in engineering, R&D, or licensing.

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