House Passes CREATE Act

March 10, 2004. The House passed HR 2391, the "Cooperative Research and Technology Enhancement (CREATE) Act", by a voice vote. This is a non-controversial bill to promote collaborative research.

The bill would amend Section 103(c) of the Patent Act, which is codified at 35 U.S.C. § 103, to address the August 8, 1997 opinion of the U.S. Court of Appeals for the Federal Circuit in OddzOn Products, Inc. v. Just Toys, Inc., which ruled that derived prior art may serve as evidence of obviousness.

Section 103(c) currently provides a safe harbor for inventions that are the product of collaboration involving co-inventors within a single company. However, scientific research is increasingly being conducted jointly by multiple companies, universities, government labs, and/or other entities.

The holding in the OddsOn case threatens to discourage collaborative research, where the scientists involved are not employed by the same company or entity. Basically, the Court interpreted Section 103(c) to mean that prior art under Sections 102(f) or 102(g) could be used to determine the obviousness of an invention where there is no common ownership or assignment of the invention and information being shared among the collaborators, and the information exchanged is not publicly known. The bill amends Section 103 to provide that patentability is not precluded in the case of research conducted across entities pursuant to a joint research agreement.

The House Judiciary Committee's wrote in its report that "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." See, House Report No. 108-425.

The Committee Report continues, "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."

The Report elaborates that "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."

Rep. Lamar Smith (R-TX), the Chairman of the House Judiciary Committee's Subcommittee on Courts, Internet and Intellectual Property (CIIP), introduced the bill on June 9, 2003. The CIIP Subcommittee held a hearing on the bill on June 10, 2003. The CIIP Subcommittee amended and approved the bill on July 22, 2003. The full Committee amended and approved the bill on January 21, 2004.

See, story titled "Representatives Introduce Patent Bill to Encourage Collaborative Research" in TLJ Daily E-Mail Alert No. 680, June 13, 2003; and story titled "House Judiciary Committee Approves CREATE Act to Promote Collaborative Research" also published in TLJ Daily E-Mail Alert No. 821, January 22, 2004.