Jon Kyl

Mr. KYL

Mr. KYL. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KYL. Mr. President, I have an amendment which I will be speaking to in just a moment. First, I ask unanimous consent that an editorial in the Arizona Republic from September 21, by Robert Robb, the subject of which is President Obama's debt-cutting plan fails to tell the whole story, be inserted in the Record at the conclusion of my remarks.

Mr. KYL. Mr. President, the amendment I will be talking about has been filed. It is amendment No. 645. But before I describe that amendment--which I believe and hope we will be able to vote on when we have our series of votes later on this afternoon--I want to respond to one thing the leader said in his remarks after lunch. He was talking about the continuing resolution, which we believe will be coming over from the House of Representatives later on today. That continuing resolution, of course, has funding for the various disasters which have befallen various parts of our country. I think the leader has indicated that he is going to be attempting to amend that House product with an increase in that spending. He asked the question rather rhetorically: Why aren't those Senators who have disasters in their States willing to vote for my increased spending amendment? Then he answered his own question, saying it is all politics. Mr. President, first of all, as you know, we are not supposed to ever question the motives of fellow Senators. I am sure that isn't what the leader had in mind, but I would suggest to the leader it is not politics that causes people to vote against his amendment. If it were politics, they would be voting for his amendment. Those Members who have disasters in their States would say, surely, they want even more money so they can be sure to cover all those disasters. So if it were politics, they would probably be voting yes. I suggest the reason they are voting no is because of principle. First of all, because there is plenty of money in the House continuing resolution to cover all of the disasters that have already occurred and those that could be anticipated over the course of the next 7 or 8 weeks, which is the period of time covered by the bill; and, secondly, we should never spend more money than necessary. I will stand corrected if I am wrong, but I do not believe the majority leader's amendment has a calculation of why all of the money he proposes is necessary based upon emergencies or disasters that have occurred. So I just wanted to make sure my colleagues appreciate if and when such a vote occurs, at least for those people with whom I have spoken, they are going to be voting on principle and on the fact there is plenty of money for disasters. There is no reason to put in more money than is needed, especially in our time of a very difficult deficit situation. Exhibit 1 [From Real Clear Politics, Sept. 21, 2011] Obama's Duplicitous Debt Proposal (By Robert Robb) President Barack Obama's debt reduction plan could be titled, The Audacity of Duplicity. According to Obama, he is proposing $4 trillion in debt reduction over the next 10 years, with there being $2 in spending cuts for every $1 in tax increases. Where to begin? Half of the president's claimed debt reduction comes from policies already in place. Obama says $1 trillion will be saved by winding down the wars in Afghanistan and Iraq. In other words, Obama wants credit for reducing debt that was never going to be incurred. Another $1 trillion is from the agreement that was reached to increase the debt ceiling. But that agreement didn't really reduce the debt by $1 trillion. It simply adopted future spending caps that would have that effect. However, there were no new laws adopted that would actually reduce spending. The caps are unenforceable promises to do something unspecific in the future. Obama is actually only proposing $2.1 trillion in new stuff. Of that, nearly $1.6 trillion is increased taxes. So, he's actually proposing $3 in tax increases for every $1 in spending cuts. But that still doesn't tell the real story. The ``spending cuts'' aren't really all spending cuts. They are just things other than tax increases, and there's over $135 billion in fee increases. Those may be warranted, but they aren't spending cuts. So, Obama actually is proposing over $1.7 trillion in additional federal revenue, making the ratio $4 in increased taxes and fees for every $1 in spending cuts. But that still doesn't tell the whole story. Obama, of course, is purposing increased stimulus spending now. Net, Obama is only proposing to decrease actual federal spending by about $245 billion over 10 years. So, the real ratio is $7 in increased taxes and fees for every $1 in actual spending cuts. In short, Obama has proposed a massive tax increase while doing very little to control federal spending. The bulk of the tax increases, $1.2 trillion, fall on individuals making over $200,000 a year. Supposedly, their tax treatment would only be returned to the levels prevailing during the Clinton prosperity, but that's another bit of duplicity. Obama proposes that the top two tax rates be returned to Clinton-era levels, but doesn't stop there. He would also limit the deductions they take, which wasn't the case during the Clinton bliss. And his health care bill already socked this group with an increase in payroll taxes of nearly 1 percent on wage income and an investment income tax increase of nearly 4 percent. In short, Obama is advocating tax rates for those earning more than $200,000 a year much higher than the Clinton-era rates, which Bill Clinton himself described as too high. This is supposedly so millionaires and billionaires pay their fair share. According to the Tax Policy Center, the top 1 percent of tax filers has 16 percent of the country's income, but pay 24 percent of all federal taxes and 35 percent of federal individual income taxes. According to Obama mythology, millionaires and billionaires pay lower tax rates than average Jacks and Jills. According to the Tax Policy Center, the top 1 percent pays 18 percent of their income in federal income taxes. The middle quintile pays less than 3 percent. Those below that actually get more money back than they pay in. Obama seems really worked up over the fact that investment income is taxed at a lower rate than wage income. But that's not really the case. Dividends are taxed at the corporate level before they are distributed to individuals, when they are taxed again. Capital gains are taxed on their nominal value, ignoring the effect of intervening inflation. If Obama were truly interested in a bipartisan down payment on debt reduction, he could have anchored his proposal in the recommendations of his debt commission. The debt commission, however, recommended about half of what Obama proposes in additional federal revenue and raised in a way that lowers rates across the board, including for millionaires and billionaires. Obama's interests, however, clearly lie elsewhere. Amendment No. 645 to Amendment No. 633

Mr. KYL. Mr. President, the amendment, as I said, is numbered 645, and I will be discussing the contents of the amendment and why I think it should be addressed. But let me precede that with this point. I think the bill before us, the TAA bill, actually deserved greater scrutiny than the process allowed. There was an opportunity for some more fundamental changes in the TAA Program than occurred. The only changes are pretty rudimentary, and I don't think anyone can contend they will save substantial amounts of money or represent fundamental reform. The process of putting this all together was by people who supported TAA, not people like me who have a real problem with TAA. So it is probably no surprise the program isn't substantially reformed. Specifically, on the TAA training, which is part of what I am focusing on, no work was done to reform the training funding to reflect the fact there are already over 40 programs dedicated to worker training. One of our colleagues, Senator Coburn, has done some great work in this area to highlight the problem. Instead, the substitute just increases overall training funding and does very minimal reform. More broadly, there is little evidence the TAA programs are actually effective. That is what I will speak to with regard to the piece I will be eliminating, hopefully, with the amendment I am proposing. We are going to spend over $1 billion on the so-called enhanced TAA provisions in the substitute and another $7 billion on the baseline program. So $1 billion on the enhanced provisions, $7 billion on the baseline program, and we don't even know whether it actually helps our citizens. I have filed other amendments that I may or may not bring up, depending upon what our schedule is, but at a minimum I hope the word of the TAA supporters can be relied upon as we move forward. For example, the substitute is intended to terminate baseline TAA after 2014. But due to CBO scorekeeping, CBO estimates that Congress could actually spend another $7.4 billion for the years 2015 to 2021--years after all the TAA is scheduled to be terminated. So I plan to work with the CBO to ensure these savings are actually extracted from the baseline. This amendment I speak of repeals the TAA for the Firms Program. It would repeal that as of October 1, 2011--in other words, the end of the fiscal year. The amendment would only save about $16 million a year, but I think it serves as a test of one's real commitment to reform. I propose eliminating this small piece of the TAA that President Barack Obama proposed be eliminated in his budget. The President's budget recommendations for this year specifically recommend termination of the TAA for Firms Program, and I thought-- since we have all talked about how our constituents keep telling us they want us to come back and work together to get things done--here is an opportunity where a Democratic President and a Republican Senator have proposed something, and it is an opportunity for colleagues on both sides of the aisle to get together and say, yes, there is at least one program--it is a small one, $16 million--that ought to be eliminated. What are the reasons for the President's request this program be dropped? According to his ``Termination, Reductions and Savings''--this was submitted as part of the fiscal year 2012 Federal budget--the first point is the resources would be better spent elsewhere. Here is what the President's budget says: The administration believes it is more effective to direct EDA's funding towards programs that make investments to promote globally competitive regions, rather than to assist specific firms that have been harmed by trade. The budget also made the point the centers are too expensive and they are poorly selected. Here is what the President's budget said: The non-profit Trade Adjustment Centers that administer the program are chosen non-competitively and have high overhead rates. So the first point is the President's budget says: Let's get rid of this program. It is not run well, and it is not centered properly on where we should be centered. The second reason for elimination of this proposal is the EDA's own budget request to Congress for fiscal year 2012 clearly shows other programs are more effective and less costly than this program--TAA for Firms--and I will quote them directly: The Economic Adjustment Assistance program, which is the most flexible tool in EDA's toolbox and provides a wide range of technical, planning, and public works and infrastructure assistance and can get money out more quickly and with far lower overhead costs, meaning more help for the communities that need it. The third reason I propose eliminating this small program is the TAA for Firms Program doesn't require any kind of significant trade impact for eligibility. In fact, according to the program's own Web site that outlines frequently asked questions, here is what it says: Question: Are only firms seriously affected by imports able to participate? Answer: No. We work with a variety of manufacturers and, for some, imports represent only a minor challenge. Regardless of the degree of impact, a firm may be eligible if it experienced sales and employment declines at least partially due to imports over the last two years. So that is the third problem. The fourth problem: Obviously, there are always bound to be some success stories, but the program's 2010 annual report raises serious questions about its effectiveness. For example, this annual report--by the way, it was required by the stimulus bill--highlights that only 56 percent of firms in 2010 actually completed the program. That means a whopping 44 percent quit for various reasons. The annual report also shows that firms that started the program in 2008 had little marketed success. After 1 year, firms that completed the program had average employment decrease by 10 percent and an average productivity increase of 11 percent, which is only slightly better than the Bureau of Labor Statistics' national average for the manufacturing industry of a decrease in employment of 13 percent and an increase in productivity of 4 percent. After 2 years, program graduates' average employment dropped by 16 percent and average productivity increased by 3 percent, while the national average for manufacturing firms saw employment drop only 12 percent and average productivity increase by 6 percent. In other words, after 2 years, firms not in the program were doing better than firms in the program despite all the money we are spending on it. The fifth reason. While it is just authorization language here, repeal does save money. The TAA for firms centers will close and their employees will be reassigned. We have to reduce the cost and reach of government if we are going to prevent fiscal collapse, and that is the primary reason I am focused on this program. It is not a huge amount of money. Under the substitute, the program would be continued at 2002 levels or, in other words, about $16 million a year. But that is money we don't have to spend, as the President's own budget said, because this program doesn't work well and in effect, as I am saying, wastes taxpayer money. So if we can't eliminate a program such as this--a program the administration wants to terminate, one EDA says could be done better with other programs, that doesn't require any great connection or impact by trade imports, that has a questionable track record with high failure rates and outcomes at least no better than firms that don't participate--then I am greatly discouraged about the Senate's ability to effect any kind of actual reform. I urge my colleagues' attention to this. I know some will say we can't make any amendment to this whatsoever or it won't be accepted by the House. You ask my House colleagues whether they would support this amendment. My guess is they would say they would be happy to support this amendment. I hope we will be able to vote for it this afternoon and that my colleagues will support amendment No. 645. Mr. President, I ask unanimous consent that this amendment be made pending.

Mr. KYL. The following Senators are necessarily absent: the Senator from Wyoming (Mr. Enzi) and the Senator from Wyoming (Mr. Barrasso).

Mr. KYL. Mr. President, this amendment is very simple. It eliminates one small piece of the TAA Program called TAA for Firms. Now, why would I do this? Strictly for bipartisan reasons, to demonstrate my agreement with President Obama, who also supports the repeal of this particular piece of the TAA. In his budget submission of this year, it specifically recommended the elimination of this program. It is only $16 million a year, but it is inefficient. As the President's budget pointed out, it does not achieve its objectives as well as other programs do. Measured against other programs, the firms that are supposedly helped actually fail at a bigger rate than other firms that are not in the program. As a result, I decided I would support one of the elements of the President's budget: to eliminate this TAA for Firms Program. Friends, if we are serious about any kind of reform for TAA, surely we can agree upon a clearly bipartisan proposal of the President of the United States, which is supported by Republicans in the Senate. I ask for your support for this amendment.

Mr. KYL. Mr. President, I ask for the yeas and nays.

Mr. KYL. The following Senators are necessarily absent: the Senator from Wyoming (Mr. Enzi) and the Senator from Wyoming (Mr. Barrasso).

Mr. KYL

Mr. KYL. Mr. President, I ask unanimous consent that the order for the roll call be dispensed with.

Mr. KYL. I would ask unanimous consent that I may speak for such time as I may consume. The ACTING PRESIDNET pro tempore. Without objection, it is so ordered.

Mr. KYL

Mr. KYL. This month marks the third anniversary of the Federal seizure of Fannie Mae and Freddie Mac, the collapse of Lehman Brothers, the bailout of AIG, and other events that marked a turning point in the global financial crisis. At the time, many journalists, pundits, and policymakers were eager to interpret the crisis as a failure of capitalism, as some called it, or a failure of free markets. There was a famous Newsweek cover that said, ``We're All Socialists Now.'' This interpretation is fundamentally flawed, and I wish to speak a little bit about that. Blaming capitalism and free markets and deregulation for causing the crisis that occurred 3 years ago does not tell the real story. We must remember that misguided government policies played a big role in pumping up the housing bubble, and they have subsequently played a big role in delaying our recovery from this crash. So I wish to briefly discuss the findings of several economists who highlight these points. Loose monetary policy was one such misguided policy that fueled the crisis. Writing recently in the quarterly journal, National Affairs, Stanford economist John Taylor pointed out that U.S. monetary policy became highly discretionary in the years leading up to the 2008 crisis, whereas monetary policy had been more rules-based during the previous two decades. Taylor has determined: The low interest rates set by the Federal Reserve from 2003 to 2005 added fuel to the housing boom and led to risk-taking and eventually a sharp increase in delinquencies and foreclosures and in the toxic assets held by financial institutions. A more rules-based Federal funds rate-- particularly one that held to the general approach that characterized Fed decisions throughout the 1980s and '90s-- would have prevented much of the boom and bust that followed. This, according to economist John Taylor. In other words, with tighter, more prudent monetary policy, the housing bubble would have been significantly smaller. Another major cause of the bubble was Federal housing policy, especially the reckless mortgage activities of government-sponsored enterprises Fannie Mae and Freddie Mac. These two institutions, operating under an implicit government guarantee, played a central role in the housing bubble. The government's guarantee permitted them to operate without adequate capital, to assume more risk than competing financial institutions, and to borrow at a below-market rate of interest. Between 2004 and 2007, Fannie and Freddie became the largest buyers of so-called subprime and Alt-A mortgages. As Columbia Business School economist Charles Calomiris has observed: Logic and historical experience suggest that even in the presence of loose monetary policy and global imbalances, if the U.S. government had not been playing the role of risky- mortgage purchaser in the years leading up to the crisis, mortgage-related losses would have been cut by more than half. To be sure, government entities were not the only institutions promoting the growth of nontraditional mortgages. But government policy was the critical factor that made the bubble so dangerously large. Housing-finance expert Peter Wallison of the American Enterprise Institute argues that: Without the huge number of defaults that arose out of the U.S. housing policy, defaults among the mortgages in the private market would not have caused a financial crisis. So with better, more responsible Federal housing policies, the crisis might have been avoided or have been less severe. Government failures have also, in the words of Nobel Prize-winning economist Gary Becker, ``prolonged the crisis.'' Indeed, the economy has not responded well to the prodigious spending, trillions in debt, and countless new regulations imposed during the Obama administration. The economic policies of the last few years seem to have hampered the confidence of job creators, while creating widespread uncertainty and undermining confidence. Michael Boskin of Stanford, in a piece entitled ``The Obama Presidency by Numbers,'' said this: President Obama's debt explosion will be a drag on the economy for years to come. . . . The share of Americans paying income taxes is the lowest in the modern era, while dependency on government is the highest in U.S. history. These are dreary findings. In January 2009, the U.S. unemployment rate stood at 7.6 percent. By October 2009, it had surged above 10 percent despite the passage of the $1.2 trillion stimulus bill. Unemployment has been above 9 percent for 26 of the 30 months since the passage of the stimulus. In fact, Boskin has found that even by the administration's inflated estimates of jobs ``created or saved'' by the stimulus, each job has cost $280,000--each job, $280,000. That is five times the average American's annual pay. Remember, that is borrowed money that will eventually have to be taken out of the private sector to pay it back. In addition to the failed stimulus package, the last Congress also enacted a pair of 2,000-page bills that were supposedly designed to repair the health care and financial systems. In the view of Becker, ``These laws and the continuing calls for additional regulations and taxes have broadened the uncertainty about the economic environment facing businesses and consumers. This uncertainty decreased the incentives to invest in long-lived producer and consumer goods. Particularly discouraged was the creation of small businesses, which are a major source of new hires.'' My point is not to needlessly pile on President Obama but to underline the need for a new approach. His policies have made things worse, and the uncertainty surrounding his new proposals has crippled America's economic recovery. As Carnegie Mellon economist Allan Meltzer has written, ``High uncertainty is the enemy of investment and growth.'' America's job creators are eager to know whether their taxes will be raised at the end of 2012, whether the new health care law will force them to lay off a substantial number of workers, whether the Dodd-Frank bill will impose unforeseen new costs, and whether the administration will impose even more regulatory hurdles. Notably, despite the administration's recent rhetoric about regulatory review, the massive new regulations in its two signature bills--health care and financial regulatory reform--will not be reconsidered. In conclusion, the 2008 financial crisis was not simply a failure of capitalism or a result of free market economic policies. We can reasonably say the crisis would not have been nearly as severe or may even have been avoided entirely without misguided government policies. All of us here would like to see a strong economic recovery, but reckless spending, debt, more regulation, and government intervention have not boosted the economy so far. It is time for another approach, one that eschews the top-down Washington management and focuses on creating incentives and long-term certainty in the private sector. Mr. President, I suggest the absence of a quorum.

Mr. KYL

Mr. KYL. The following Senators are necessarily absent: the Senator from North Carolina (Mr. Burr), the Senator from Utah (Mr. Hatch), the Senator from Oklahoma (Mr. Inhofe), the Senator from Kentucky (Mr. Paul), and the Senator from Idaho (Mr. Risch). Further, if present and voting, the Senator from Utah (Mr. Hatch) would have voted ``yea.''

Mr. KYL

Mr. KYL. Mr. President, recently, international media and diplomatic attention has focused on the inspiring stories of citizens across the Middle East and North Africa demanding greater participation in their government. While the regime changes in Libya, Egypt, and Tunisia have certainly opened the door for democratic progress in a region long dominated by authoritarian rulers, we cannot allow these hopeful aspirations to monopolize our focus or distract our attention from the fact that brutal and oppressive regimes remain. Today, I want to highlight an especially dangerous and odious regime--that of Iranian President Mahmoud Ahmadinejad and the mullahs in Tehran. I am seriously concerned by Tehran's continued march toward a nuclear weapon. Earlier this month the International Atomic Energy Agency, IAEA, published a report confirming the obvious--that Iran remains in violation of United Nations Security Council resolutions to halt its nuclear program, and that it is not cooperating with the IAEA. We also know that the Iranian regime continues to increase its support for terrorist groups operating in Iraq; reports also indicate that it is providing weapons and assistance to the Assad regime in Damascus in its brutal crackdown on the Syrian people. Iranian authorities, apparently fearful of the popular unrest that swept longtime leaders in Egypt and Tunisia from power--and which is currently threatening Bashar al-Assad's dictatorship in Syria--have cracked down on dissent and increased the arrest and detention of activists and opposition figures in the past months--even arresting young people with squirt guns. One dissident whose case I have been following is Bahareh Hedayat, a student and women's rights activist. Bahareh was arrested in December 2009 for participating in Iran's prodemocracy student movement and placed in solitary confinement in the notorious Evin prison. After nearly 2 months of interrogation, she was sentenced to 9\1/2\ years in prison for her activism. Her 9\1/2\ year sentence included 5 years for ``activities against the state,'' 2 years for insulting Supreme Leader Khamenei, and 6 months for insulting Mahmoud Ahmadinejad. Iranian authorities also reinstated a 2-year sentence she received in connection with a 2006 women's rights protest that had been suspended. While in prison, Bahareh has endured Evin's harsh conditions, interrogation, and a lengthy solitary confinement, all while being denied contact with her husband and family. She has kept her spirit and has even protested her detention and treatment with hunger strikes. However, detention has taken a toll on her and her health has deteriorated. Earlier this year she developed gall stones, and while it was clear that the prison's facilities could not provide adequate treatment, she was only allowed to seek outside care this month. After receiving treatment, she was promptly returned to prison last week. Bahareh Hedayat and dissidents like her--those who have been brutally punished for seeking basic human freedoms--has shown great courage in confronting the brutality and intolerance of the Iranian regime. She and thousands of others have sacrificed immeasurably to bring about reform in Iran, the United States must show similar courage and do all in its power to support their vision of a peaceful, free, and democratic Iran.

Mr. KYL

Mr. KYL. The following Senator is necessarily absent: the Senator from Nevada (Mr. Heller).

Mr. KYL

Mr. KYL. The following Senator is necessarily absent: the Senator from Florida (Mr. Rubio).

Mr. KYL. The following Senator is necessarily absent: the Senator from Florida (Mr. Rubio). Further, if present and voting, the Senator from Florida (Mr. Rubio) would have voted ``yes.''

Mr. KYL. The following Senator is necessarily absent: The Senator from Florida (Mr. Rubio). Further, if present and voting, the Senator from Florida (Mr. Rubio) would have voted ``yea.''

Mr. KYL

Mr. KYL. The following Senator is necessarily absent: the Senator from Florida (Mr. Rubio).

Mr. KYL

Mr. KYL. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KYL

Mr. KYL. Mr. President, President Obama is about to roll out another jobs plan. He talked about it last week. This is 2\1/2\ years after the first stimulus bill, which, with interest, amounted to about $1.2 trillion. His economic advisers have confirmed the fact that this stimulus concept is actually based on the Keynesian economic theory. As our Republican leader noted last week, there are now, unfortunately, 1.7 million fewer jobs in America, according to the Bureau of Labor Statistics, than there were before the President's first stimulus bill. So the question, obviously, is whether this theory is better in theory than it is in practice. I wanted to talk today a little about the two different basic theories of economic growth and what you do in a situation of economic downturn, as we have today. How should we be looking at stimulation of job creation and economic growth? The two competing theories, of course, are the Keynesian theory, which I mentioned, and what some have called supply-side economics. There is no question that the Keynesian theory has been one to which the President's economic advisers generally adhere. It was used to justify the 2009 stimulus program and other programs. For example, the one that sticks out in my mind is the so-called cash for clunkers, but there were other transfer payment government programs, temporary tax credits, and others. But the theory in the cash for clunkers is a good example, which is that in recessionary times, if the government spends money and gives it to people so that they can spend it, that will therefore stimulate consumption; that business will respond by increasing production, and that will create jobs. Recently, for example, Agriculture Secretary Tom Vilsack said that because of a theoretical multiplier effect under this model, food stamps--government money taken from taxpayers and given to people who are entitled or eligible for food stamps--would actually stimulate the economy by a factor of 1.84; in other words, that $1 of food stamps would actually generate $1.84 in economic activity. There are a lot of problems with that theory. The first is that the multiplier effect itself has been discredited as not something that, in fact, actually happens. A Harvard economist by the name of Robert Barro has explained this, and I will quote from one of his writings: Theorizing aside, Keynesian policy conclusions, such as the wisdom of additional stimulus geared to money transfers, should come down to empirical evidence. And there is zero evidence that deficit-financed transfers raise GDP and employment--not to mention evidence for a multiplier of two. If [Secretary Vilsack's claim] were valid, this result would be truly miraculous. The administration found the evidence it wanted--multipliers around two--by consulting some large- scale macroeconometric models, which substitute assumptions for identification. In other words, economists can prove the multiplier in theory with these models, but there is no empirical evidence that it has ever occurred. It is a bit like money growing on trees. The money has to come from somewhere, and, of course, it comes out of the pockets of taxpayers or the government borrows it and it eventually has to be repaid with taxpayer tax dollars. The second problem is that to the extent one assumes the problem is that Americans are too broke to spend money, the question then is, How can the government make that up for us? Aren't the people the government? Doesn't the government get its money from the people in the form of taxes or, if it borrows, the people's taxes eventually have to pay back the borrowed money. In other words, we have to pay it back later. Third, people tend to change their spending habits when they know they will have greater consistent income over time, such as when they receive a raise at work. If you give people a one-time payment, the evidence has shown they either save that or they shift future consumption forward. In other words, they may buy something now they were going to buy later. That is where the Cash for Clunkers Program failed. But it doesn't permanently increase their work effort or their incentive to invest, which, of course, is exactly what is needed to jump-start economic growth. The job creators themselves tend to hire when they know they are going to have permanent tax relief or regulatory relief, not just when they receive a one-time payment for something. That is only good for as long as it lasts, but it doesn't provide the consistent, long-term prospect for income, for example, that they need in order to take the step of actually hiring a person and committing to paying that person over time. Fourth, the Keynesian theory assumes the government has the foresight to determine or, as President Obama's former National Economic Council chief Larry Summers said of the stimulus, to target which spending programs would best create economic growth, but that rarely happens. The obvious problem with this assumption, of course, is that Congress does not spend taxpayer money wisely. We see time and time again how a well-intentioned piece of legislation gets loaded up with special projects, frequently which are costly to the public and very questionable in their value. That was one of the things that was wrong with the stimulus package itself. There is an eye-opening new set of working papers that reveals the truth about this. Mercatus Center scholars Garett Jones and Daniel Rothschild took a look at, among other things, whether Congress did a good job of targeting the stimulus funds at unemployed workers and weak sectors of the economy. They surveyed hundreds of firms that received stimulus funding and gathered more than 1,000 voluntary, anonymous responses from employees and managers to help shed more light on what happened to organizations that received stimulus funds. Here is what they wrote: Our survey finds no evidence of such [Keynesian] targeting occurring, at least not successfully. For example, one city was given $4 million to improve energy efficiency even though a budget shortfall had just forced it to lay off 185 public workers. In another case study, a Federal contractor was instructed to purchase more expensive tiles than he needed for a particular project. The theory was, in that way the government could claim the stimulus money was getting out the door faster. This isn't the way to spur economic growth. And I believe most Keynesians believe that what the government spends its money on matters. Moreover, the study I referred to also found that less than half of those hired with the stimulus funds were unemployed--about 42.1 percent. Jobs were simply moving from one place to another. The authors of the study wrote: Hiring is not the same thing as net job creation. This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy. In other words, while an employer might steal an employee from another employer, that is not the same thing as creating a net new job. So the bottom line here is there is a major misconception that consumption fueled by government spending actually creates jobs. It turns out that it doesn't. It just inefficiently moves borrowed money around with a bill that has to be repaid later. I believe it is also important to remember that economic growth stems from combining three inputs: labor, capital, and technology. These three factors of production result in output we can then consume. This is the beginning of the difference between the Keynesian philosophy and the supply-side philosophy, which focuses on productivity. And what is required for society to be more productive? Labor, capital, and technology. Properly applied, when these three aspects of an economy are well-aligned, the economy can grow, jobs can be produced, and people will consume, but they will be consuming things that have been produced by the businesses of the country. Without labor, capital, and technology, there can be no consumption. I mean, that is obvious. Focusing on policies that stimulate consumption targets the wrong side of the equation. In order to get the economy going, you need to focus on the inputs. There is an incidental problem here. Stimulating consumption also raises prices, which is exactly what we don't need. When you stimulate input or productivity, you produce more of the quality goods people want, and the prices of those products are down if there is enough productivity. But when you try to stimulate consumption for a fixed number of goods, obviously the price of those goods goes up. There is a fear of inflation in our society today, and that is precisely what this kind of Keynesian stimulus will produce. This matter of focusing on inputs, as I said, is where the second philosophy of economic growth comes in--supply-side economics, which focuses on productivity. The fundamental principle of supply-side economics is that people work harder and take more risks when there are more opportunities for economic gain and less government intrusion. Translating this economic philosophy into policy means several things--first of all, reducing government consumption by cutting spending, thus leaving resources in the private sector. I mentioned food stamps before. The government can only give money to food stamp recipients by taxing the money of someone else or borrowing the money. Eventually, that borrowed money needs to be paid back. How is it paid back? It is paid back by taxpayers paying money to the government, which can then repay its debt. In either event, eventually the money the government spends to stimulate the economy has to come from somewhere, and the only place it can come from is the American taxpayer. The bottom line is, with Keynesian stimulus spending, there is no free lunch. The money doesn't materialize out of nowhere. It is not free for the government to inject this money into the economy by giving it to favored groups or to redistribute it to people within our society so they can spend it. That is why this factor some people talk about that we actually get more money back than we put in is wrong in two ways. First, as I pointed out before, there is no empirical evidence that ever happened. Secondly, eventually, the money has to be repaid or, if it was taxpayer money to begin with, that is $1 less taxpayer money that that taxpayer has to invest or to consume or, if it is a businessperson, to hire someone in the private business. The bottom line is, government money isn't free. So the whole premise of Keynesian economics that we get a free dollar someplace and that produces benefits by people then spending it is wrong. How about leaving it in the pocket of the person whom we want to spend it in the first place? Chances are that person can make a more intelligent decision about what he or she needs than the U.S. Government. Second, as I said here, we are talking about incentives in the marketplace which are based, by every economic study, on long-term policies: long-term tax policies, long-term regulatory policies. An individual small businessman, for example, wants to know what the law will be 2 and 3 and 4 years out before he decides to hire a new employee he is going to have to pay taxes for, whom he is going to have to provide potentially a health benefit for, certainly a salary. If he doesn't think that government policy over that long term is going to enable him to continue to employ the individual, he is not going to hire him in the first place. Another thing that supply-side economics means is that the worst thing we could do, especially in economic down times, is to raise taxes on anyone but certainly not on the very employers we count on to hire more workers. Who is the first to hire coming out of a recession? It is small business. So the very people we are asking to hire more Americans to put them back to work are the people who would be impacted by the taxes the President talked about the other night. He is talking about taxing ``wealthier Americans.'' What does that mean? It means people who make incomes above $200,000, and that happens to be the group that represents the bulk of the small business entrepreneurs in America. Fifty percent of all small business income is paid in those top two income tax brackets on which the President would raise taxes. So the very people we want to hire more workers, we are going to impose more taxes on; and then we are going to expect them to hire more to reduce unemployment so we can have greater economic growth? It simply doesn't work that way. The final point has to do with regulations. More and more, the President seems to be acknowledging that the runaway regulations of his administration are actually beginning to harm business and job creation. This is why he has announced his effort to try to streamline the regulations and get rid of any that don't work; why he withdrew a proposed regulation from the Environmental Protection Agency recently that would have had a very negative impact on business. He is beginning to recognize that his administration is a big wet blanket over businesses these days because of their burden of regulations. We cannot stimulate the economy or job growth with the government imposing more and more costly regulations on American business every day. The President set up a false choice in his speech the other night. He said: We have to do away with these job-killing regulations. But, he said, I will not do away with the regulations which protect the American people from--and then he named a litany of things he wants to protect the American people from. Nobody is talking about eliminating all regulations or having unsafe food or unsafe products for little babies and the like. We are not talking about that. We are talking about the issuance of thousands and thousands of pages of new regulations every month by this administration at an extraordinary cost on American business with very little regard for a cost benefit--in other words, how much society benefits versus the cost of these regulations imposed on business. By the way, when I say the cost imposed on businesses, who pays? Businesses are the people in the business. The consumers end up paying the cost of the regulations which obviously are passed on. So this is, again, another indirect tax on the American people. That is why I said before, no tax--but especially in a time such as this--whether direct or indirect, is a good idea because of the negative impact it has on job creation. The bottom line of all this is, there are two basic theories. The one theory basically says we can get something for nothing. The government will get money, forget where it gets it. But when it gives it to people, they will spend it. When they spend it, then whatever they spend it on, that producer has to produce more of those things so they will have to hire somebody to make more of them. But that is exactly backward. It doesn't work that way. The supply-side theory says, first of all, the money didn't come to the government free. It had to be taken out of the private sector. The government either had to tax somebody, so they have $1 less to spend, or it gives an IOU, which means eventually the taxpayers have to pay the taxes to repay the IOU. In either case, that is $1 taken out of the economy. It is $1 not there in the private sector for an entrepreneur to hire someone or to produce something. So the supply-side economics says, let's look at the other side of the equation. Rather than focusing on consumption, let's focus on productivity where technology, labor, and capital can produce more, can make a society more productive, more wealthy, where more people can have work, they can have better paying jobs. What they produce has greater value, and people are willing to buy it, as a result of which they put more money back into the economy. That is the cycle that produces wealth, and it is the cycle that has caused economic growth and job creation and wealth generation in this country now for over 200 years. It begins with the proposition that job growth starts in the private sector, that government doesn't create jobs, that money starts with the people, the taxpayers. They generate the income, and the government gets a piece of that in the way of tax revenue. But the money belongs to the people, not the government. Third, there is no magic when the government somehow gets $1 in order to redistribute it so somebody can buy something with it. We have to remember where the dollar came from. It didn't materialize out of thin air. It started with a hard-working taxpayer who earned the dollar and then either paid it to the government in taxes or is paying it in taxes to repay a debt that the government incurred in order to borrow money for a stimulus package. As we think about the President's proposed third or fourth stimulus, however we count it now, I hope we can keep these economic theories in mind: There is no free lunch. There is no free money. Eventually, the taxpayers are who create the wealth and the job creators create the jobs. If we keep those principles in mind, I think we will look a little bit more skeptically on the notion that we can somehow target job creation with yet another stimulus bill and that is going to get us out of our economic woes. If my colleagues will keep these principles in mind, I think we will make wise decisions and prevent the country from going even deeper into debt and try to focus on the long term so businesses can actually make decisions based upon long-term thinking rather than based upon the ephemeral effects of short-term stimulus.

Mr. KYL

Mr. KYL. The following Senators are necessarily absent: the Senator from South Carolina (Mr. DeMint), the Senator from North Dakota (Mr. Hoeven), the Senator from Texas (Mrs. Hutchison), the Senator from Oklahoma (Mr. Inhofe), the Senator from Illinois (Mr. Kirk), the Senator from Alaska (Ms. Murkowski), the Senator from Florida (Mr. Rubio), and the Senator from Louisiana (Mr. Vitter). Further, if present and voting, the Senator from South Carolina (Mr. DeMint) would have voted ``nay.''

Mr. KYL

Mr. KYL. The following Senator is necessarily absent: the Senator from Florida (Mr. Rubio).

Mr. KYL

Mr. KYL. The following Senator is necessarily absent: the Senator from Indiana (Mr. Coats).

Mr. KYL. Madam President, I rise today to say a few words about aspects of the present bill that differ from the bill that passed the Senate in March. I commented at length on the Senate bill when that bill was before this body. Since the present bill and the Senate bill are largely identical, I will not repeat what I said previously, but will simply refer to my previous remarks, at 157 Cong. Rec. 1368-80, daily ed. March 8, 2011, which obviously apply to the present bill as well. As I mentioned earlier, Mr. Smith negotiated his bill with Senators Leahy, Grassley, and me as he moved the bill through the House of Representatives. The final House bill thus represents a compromise, one which the Senate supporters of patent reform have agreed to support in the Senate. The provisions that Mr. Smith has added to the bill are ones that we have all had an opportunity to consider and discuss, and which I fully support. Section 19(d) of the present bill adds a new section 299 to title 35. This new section bars joinder of accused infringers as codefendants, or consolidation of their cases for trial, if the only common fact and transaction among the defendants is that they are alleged to have infringed the same patent. This provision effectively codifies current law as it has been applied everywhere outside of the Eastern District of Texas. See Rudd v. Lux Products Corp., 2011 WL 148052. (N.D. Ill. January 12, 2011), and the committee report for this bill at pages 54 through 55. H.R. 1249 as introduced applied only to joinder of defendants in one action. As amended in the mark up and in the floor managers' amendment, the bill extends the limit on joinder to also bar consolidation of trials of separate actions. When this change was first proposed, I was skeptical that it was necessary. A review of legal authority, however, reveals that under current law, even if parties cannot be joined as defendants under rule 20, their cases can still be consolidated for trial under rule 42. For example, as the district court held in Ohio v. Louis Trauth Dairy, Inc., 163 F.R.D. 500, 503 (S.D. Ohio 1995), ``[e]ven when actions are improperly joined, it is sometimes proper to consolidate them for trial.'' The same conclusion was reached by the court in Kenvin v. Newburger, Loeb & Co., 37 F.R.D. 473 (S.D.N.Y. 1965), which ordered severance because of misjoinder of parties, concluding that the claims against the defendants did not arise out of single transaction or occurrence, but then suggested the desirability of a joint trial, and expressly made its severance order without prejudice to a subsequent motion for consolidation under rule 42(a). Similarly, in Stanford v. TVA, 18 F.R.D. 152 (M.D. Tenn. 1955), a court found that the defendants had been misjoined, since the claims arose out of independent transactions, and ordered them severed. The court subsequently found, however, that a common question existed and ordered the defendants' cases consolidated for trial. That these cases are not just outliers is confirmed by Federal Practice and Procedure, which comments as follows at Sec. 2382: Although as a general proposition it is true that Rule 42(a) should be construed in harmony with the other civil rules, it would be a mistake to assume that the standard for consolidation is the same as that governing the original joinder of parties or claims. . . . [M]ore than one party can be joined on a side under Rule 20(a) only if there is asserted on behalf of or against all of them one or more claims for relief arising out of the same transaction or occurrence or series of transactions or occurrences. This is in addition to the requirement that there be some question of law or fact common to all the parties. But the existence of a common question by itself is enough to permit consolidation under Rule 42(a), even if the claims arise out of independent transactions. If a court that was barred from joining defendants in one action could instead simply consolidate their cases for trial under rule 42, section 299's purpose of allowing unrelated patent defendants to insist on being tried separately would be undermined. Section 299 thus adopts a common standard for both joinder of defendants and consolidation of their cases for trial. Another set of changes made by the House bill concerns the coordination of inter partes and postgrant review with civil litigation. The Senate bill, at proposed sections 315(a) and 325(a), would have barred a party or his real party in interest from seeking or maintaining an inter partes or postgrant review after he has filed a declaratory-judgment action challenging the validity of the patent. The final bill will still bar seeking IPR or PGR after a declaratory- judgment action has been filed, but will allow a declaratory-judgment action to be filed on the same day or after the petition for IPR or PGR was filed. Such a declaratory-judgment action, however, will be automatically stayed by the court unless the patent owner countersues for infringement. The purpose of allowing the declaratory-judgment action to be filed is to allow the accused infringer to file the first action and thus be presumptively entitled to his choice of venue. The House bill also extends the deadline for allowing an accused infringer to seek inter partes review after he has been sued for infringement. The Senate bill imposed a 6-month deadline on seeking IPR after the patent owner has filed an action for infringement. The final bill extends this deadline, at proposed section 315(b), to 1 year. High-technology companies, in particular, have noted that they are often sued by defendants asserting multiple patents with large numbers of vague claims, making it difficult to determine in the first few months of the litigation which claims will be relevant and how those claims are alleged to read on the defendant's products. Current law imposes no deadline on seeking inter partes reexamination. And in light of the present bill's enhanced estoppels, it is important that the section 315(b) deadline afford defendants a reasonable opportunity to identify and understand the patent claims that are relevant to the litigation. It is thus appropriate to extend the section 315(b) deadline to one year. The final bill also extends intervening rights to inter partes and post-grant review. The bill does not allow new matter to be introduced to support claims in IPR and PGR and does not allow broadening of claims in those proceedings. The aspect of intervening rights that is relevant to IPR and PGR is section 252, first paragraph, which provides that damages accrue only from the date of the conclusion of review if claim scope has been substantively altered in the proceeding. This restriction applies even if the amendment only narrowed the scope of the claims. See Engineered Data Products, Inc. v. GBS Corp., 506 F.Supp.2d 461, 467 (D. Colo. 2007), which notes that ``the Federal Circuit has routinely applied the intervening rights defense to narrowing amendments.'' When patent-defeating prior art is discovered, it is often impossible to predict whether that prior art will be found to render the entire invention obvious, or will only require a narrowing amendment. When a challenger has discovered such prior art, and wants to practice the invention, intervening rights protect him against the risk of gong forward--provided, of course, that he is correct in his judgment that the prior art at least requires a substantive narrowing of claims. The final bill also adds a new subsection to proposed section 257, which authorizes supplemental examination of patents. The new subsection provides that the Director shall refer to the U.S. Attorney General any ``material fraud'' on the Office that is discovered during the course of a Supplemental Examination. Chairman Smith's explanation of this addition, at 157 Cong. Rec. E1182-83 (daily ed. June 23, 2011), clarifies the purpose and effect of this new provision. In light of his remarks, I find the addition unobjectionable. I would simply add to the Chairman's remarks that, in evaluating whether a fraud is ``material'' for purpose of referral, the Director should look to the Federal Circuit's decision in Therasense, Inc. v. Becton, Dickinson and Co., __F.3d__, 2011 WL 2028255 (May 25, 2011). That case holds, in relevant part, that: [T]he materiality required to establish inequitable conduct is but-for materiality. When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. Hence, in assessing the materiality of a withheld reference, the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference. Finally, perhaps the most important change that the House of Representatives has made to the America Invents Act is the addition of a prior-commercial-use defense. Current law, at section 273, creates a defense of prior-user rights that applies only with respect to business-method patents. The final bill rewrites section 273, creating a PCU defense that applies to all utility patents. University researchers and their technology-transfer offices had earlier objected to the creation of such a defense. Their principal concern was that the defense would lead to a morass of litigation over whether an infringer was entitled to assert it, and the expense and burden of this litigation would ultimately prevent universities and small companies from enforcing valid patents. The compromise reached in the House of Representatives addresses university concerns by requiring a defendant to show that he commercially used the subject matter that infringes the patent at least 1 year before the patent owner either filed an application or disclosed the invention to the public. The House compromise also precludes assertion of the defense against most university-owned patents. The PCU defense is similar to the prior-user right that exists in the United Kingdom and Germany. The defense is a relatively narrow one. It does not create a general license with respect to the patented invention, but rather only allows the defendant to keep making the infringing commercial use that he establishes that he made 1 year before the patentee's filing or disclosure. The words ``subject matter,'' as used in subsection (a), refer to the infringing acts of the defendant, not to the entire patented invention. An exception to this limit, which expands the defense beyond what would be allowed in the United Kingdom, appears in subsection (e)(3), which allows the defendant to increase the quantity or volume of the use that he establishes that he made of the invention. Subsection (e)(3) also confirms that the defendant may improve or otherwise modify his activities in ways that do not further infringe the patent, although one would think that this would go without saying. The PCU defense is principally designed to protect the use of manufacturing processes. For many manufacturing processes, the patent system presents a catch-22: if the manufacturer patents the process, he effectively discloses it to the world. But patents for processes that are used in closed factories are difficult to police. It is all but impossible to know if someone in a factory in China is infringing such a patent. As a result, unscrupulous foreign and domestic manufacturers will simply use the invention in secret without paying licensing fees. Patenting such manufacturing processes effectively amounts to giving away the invention to competitors. On the other hand, if the U.S. manufacturer does not patent the process, a subsequent party may obtain a patent for it, and the U.S. manufacture will be forced to stop using a process that he was the first to invent and which he has been using for years. The prior-commercial-use defense provides relief to U.S. manufacturers from this Catch-22, allowing them to make long-term use of a manufacturing process without having to give it away to competitors or run the risk that it will be patented out from under them. Subsection (a) expands the defense beyond just processes to also cover products that are used in a manufacturing or other commercial process. Generally, products that are sold to consumers will not need a PCU defense over the long term. As soon as the product is sold to the public, any invention that is embodied or otherwise inherent in that product becomes prior art and cannot be patented by another party, or even by the maker of the product after the grace period has expired. Some products, however, consist of tools or other devices that are used only by the inventor inside his closed factory. Others consist of substances that are exhausted in a manufacturing process and never become accessible to the public. Such products will not become prior art. Revised section 273 therefore allows the defense to be asserted with respect to such products. The defense can also be asserted for products that are not used to make a useful end result that is sold to others, but that are used in an internal commercial process. This would include, for example, customized software that is used to run a company's human-resources system. So long as use of the product is integrated into an ongoing commercial process, and not merely fleeting or experimental or incidental to the enterprise's operations, the PCU defense can be asserted with respect to that product. The present bill requires the defendant to commercially use the invention in order to be able to assert the defense. Chairman Smith has suggested, at 157 Cong. Rec. E1219 (daily ed. June 28, 2011), that in the future Congress should expand the defense so that it also applies when a company has made substantial preparations to commercially use an invention. Some have also suggested that the defense should be expanded to cover not just using, but also making and selling an invention if substantial preparations have been made to manufacture the invention. This would expand the defense to more fully compensate for the repeal of current section 102(g), which allows a party to invalidate a patent asserted against it if the party can show that it had conceived of the invention earlier and diligently proceeded to commercialize it. On the one hand, universities and others have expressed concern that a ``substantial preparations'' predicate for asserting the PCU defense would lead to expensive and burdensome litigation over whether a company's activities reflect conception and diligent commercialization of the invention. Some argue that it is often the case that different companies and researchers are working on the same problem, and it is easy for the unsuccessful parties to later recharacterize their past efforts as capturing or diligently implementing the successful researcher's invention. Questions have also arisen as to how tentative preparations may be and still qualify as ``substantial preparations.'' For example, if a company had not broken ground for its factory, but had commissioned an architect to draw up plans for it, would that qualify? Would taking out a loan to build the factory qualify as substantial preparations? On the other hand, proof of conception and diligent commercialization are currently used to apply section 102(g)(2), and I have not heard complaints that the current defense has resulted in overly burdensome litigation. In the end, however, a substantial-preparations predicate is not included in this bill simply because that was the agreement that was struck between universities and industry in the House of Representatives last summer, and we are now effectively limited to that agreement. Perhaps this issue can be further explored and revisited in a future Congress, though I suspect that many members will want a respite from patent issues after this bill is completed. The final bill also drops the requirement of a showing of a reduction to practice that previously appeared in subsection (b)(1). This is because the use of a process, or the use of product in a commercial process, will always constitute a reduction to practice. One change made by the original House bill that proved contentious is the expansion of the personal nature of the defense, now at subsection (e)(1)(A), to also include uses of the invention made by contractors and vendors of the person asserting the defense. The House bill originally allowed the defendant to assert the defense if he performed the commercial use or ``caused'' its performance. The word ``caused,'' however, could be read to include even those uses that a vendor made without instructions or even the contemporaneous knowledge of the person asserting the defense. The final bill uses the word ``directed,'' which limits the provision only to those third-party commercial uses that the defendant actually instructed the vendor or contactor to use. In analogous contexts, the word ``directed'' has been understood to require evidence that the defendant affirmatively directed the vendor or contractor in the manner of the work or use of the product. See, for example, Ortega v. Puccia, 75 A.D. 54, 59, 866 N.Y.S.2d 323, 328 (N.Y. App. 2008). Subsection (e)(1)(A)'s reference to entities that ``control, are controlled by, or under common control with'' the defendant borrows a term that is used in several federal statutes. See 12 U.S.C. 1841(k), involving bank holding companies, 15 U.S.C. 78c(a)(4)(B)(vi), involving securities regulation, 15 U.S.C. 6809(6), involving financial privacy, and 49 U.S.C. 30106(d)(1), involving motor vehicle safety. Black's Law Dictionary 378 (9th ed. 2009) defines ``control'' as the ``direct or indirect power to govern the management and policies of a person or entity, whether through ownership of securities, by contract, or otherwise; the power or authority to manage, direct, or oversee.'' A few other aspects of the PCU defense merit brief mention. Subsection (e)(5)(A), the university exception, was extended to also include university technology-transfer organizations, such as the Wisconsin Alumni Research Foundation. Subparagraph (B), the exception to the university exception, is only intended to preclude application of subparagraph (A) when the federal government is affirmatively prohibited, whether by statute, regulation, or executive order, from funding research in the activities in question. In the course of the recodification of former subsection (a)(2) as new (c)(2), the former's subparagraph (B) was dropped because it is entirely redundant with subparagraph (A). Finally, subsection (e)(4), barring assertion of the defense if use of the subject matter has been abandoned, should not be construed to necessarily require continuous use of the subject matter. It is in the nature of some subject matter that it will be used only periodically or seasonally. If such is the case, and the subject has been so used, its use has not been abandoned. I would also like to take a moment to once again address the question of the grace period created by this bill. During the House and Senate debates on the bill, opponents of the first-to-file system have occasionally asserted that they oppose the bill's move to first to file because it weakens the grace period. See 157 Cong. Rec. S1094, S1096, S1112 (daily ed. March 2, 2011), and 157 Cong. Rec. H4424, H4430 (daily ed. June 22, 2011). Some of these arguments are difficult to understand, in part because opponents of first to file have used the term ``grace period'' to mean different things. Some have used the term to mean the period between the time when the inventor conceives of the invention and the time when he files a full or even provisional application. Obviously, if the ``grace period'' is defined as the first-to-invent system, then the move to first to file eliminates that version of the grace period. Others, however, have suggested that public uses, sales, or ``trade secrets'' will bar patenting under new section 102(b), even if they consist of activities of the inventor during the year before filing. This is not the case, and I hope that courts and executive officials interpreting this act will not be misled by arguments made by opponents of this part of the bill. The correct interpretation of section 102 and the grace period is that which has been consistently advanced in the 2007 and 2011 committee reports for this bill, see Senate Report 110- 259, page 9, and House Report 112-98, page 43, as well as by both Chairman Smith and Chairman Leahy, see 157 Cong. Rec. S1496-97 (daily ed. March 9, 2011), and 157 Cong. Rec. H4429 (daily ed. June 22, 2011). These two chairmen are the lead sponsors and authorizing chairmen of this year's bills, which are identical with respect to section 102. As Chairman Smith most recently explained in his June 22 remarks, ``contrary to current precedent, in order to trigger the bar in new 102(a) in our legislation, an action must make the patented subject matter `available to the public' before the effective filing date.'' Therefore, ``[i]f an inventor's action is such that it triggers one of the bars under 102(a), then it inherently triggers the grace period in section 102(b).'' When the committee included the words ``or otherwise available to the public'' in section 102(a), the word ``otherwise'' made clear that the preceding items are things that are of the same quality or nature. As a result, the preceding events and things are limited to those that make the invention ``available to the public.'' The public use or sale of an invention remains prior art, thus making clear that an invention embodied in a product that has been sold to the public more than a year before an application was filed, for example, can no longer be patented. Once an invention has entered the public domain, by any means, it can no longer be withdrawn by anyone. But public uses and sales are prior art only if they make the invention available to the public. In my own remarks last March, I cited judicial opinions that have construed comparable legislative language in the same way. Since that time, no opponent of the first-to-file transition has identified any caselaw that reads this legislative language any other way, nor am I aware of any such cases. I would hope that even those opponents of first to file who believe that supporters of the bill cannot rely on committee reports and sponsors' statements would at least concede that Congress is entitled to rely on the consistent judicial construction of legislative language. Finally, I would note that the interpretation of 102 that some opponents appear to advance--that nondisclosing uses and sales would remain prior art, and would fall outside the 102(b) grace period--is utterly irrational. Why would Congress create a grace period that allows an invention that has been disclosed to the world in a printed publication, or sold and used around the world, for up to a year, to be withdrawn from the public domain and patented, but not allow an inventor to patent an invention that, by definition, has not been made available to the public? Such an interpretation of section 102 simply makes no sense, and should be rejected for that reason alone. Let me also address two other misstatements that have been made about the bill's first-to-file system. In remarks appearing at 157 Cong. Rec. S1095 (daily ed. March 2, 2011), it was suggested that a provisional application filed under the first-to-file system will be vulnerable to an attack that the inventor failed to disclose the best mode of the invention. This is incorrect. Section 15 of this bill precludes the use of the best-mode requirement as a basis for cancelling a claim or holding it invalid. It was also suggested, at the same place in the record, that discovery would not be allowed in the derivation proceedings created by section 3(i) of the bill. That is incorrect. Section 24 of title 35 allows discovery in any ``contested case.'' The Patent Office's regulations, at 37 CFR 41.2(2), indicate that contested cases included Board proceedings such as interferences. It is not apparent to me why these laws and regulations would suggest anything other than that discovery will be allowed in derivation proceedings. Finally, let me close by commenting on section 18 of the bill. Some legitimate interests have expressed concern that non-business-method patents will be subject to challenge in this proceeding. I have been asked to, and am happy to, reiterate that technological inventions are excluded from the scope of the program, and that these technological inventions include inventions in the natural sciences, engineering, and computer operations--and that inventions in computer operations obviously include software inventions. This does not mean that a patent is ineligible for review simply because it recites software elements or has been reduced to a software program. If that were the case, then very few of even the most notorious business-method patents could be reviewed under section 18. Rather, in order to fall within the technological-invention exclusion, the invention must be novel as software. If an invention recites software elements, but does not assert that it is novel as software, or does not colorably appear to be so, then it is not ineligible for review simply because of that software element. But an actual software invention is a technological invention, and is not subject to review under section 18.

Mr. KYL. The following Senator is necessarily absent: the Senator from Florida (Mr. Rubio).