Welcome to Skilled in the Art. I'm Law.com IP reporter Scott Graham. Today I've got an update on what I like to think of as Mission Impossible: Section 101 Protocol.That's the effort by Sens. Thom Tillis and Chris Coons to forge a legislative compromise on the statutory definition of patent eligibility. They're holding a second roundtable among stakeholders this week, and they've now got their own subcommittee to process the work. If you're wondering what patent holders mean when they say the current state of the law is too unpredictable, look no further than appeals heard last week involving Trading Technologies Inc. As I describe below, the Federal Circuit is considering whether it should ignore its own 2017 ruling on the same patents. As always you can email me your thoughts and follow me on Twitter.

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Sens. Thom Tillis, left, and Chris Coons.

Senators Press Ahead on Section 101 Mission

In his annual predictions column for 2019, IP Watchdog's Gene Quinn flatly stated that “Congress will do nothing on patent reform in 2019.” But, he predicted, “there will be much effort behind the scenes on Capitol Hill to position various legislative fixes to 35 U.S.C. 101 so that when attention does turn to patent eligibility the ground work will be laid and much of the heavy lifting already done.”

So far, Quinn's predictions seem to be playing out. Efforts on Section 101 are under way behind and in front of the scenes. And they probably have years to go before bearing any fruit.

The latest development came last week as the Senate Judiciary Committee announced it would reestablish a subcommittee on intellectual property. Subcommittee Chair Thom Tillis said the move is prompted by issues ranging from “rampant theft from state actors like China, to confusion among innovators and inventors about what is even patentable.”

Tillis and Sen. Chris Coons, who will be the subcommittee's ranking Democrat, gathered a range of stakeholders from the technology and life science industries for a private roundtable discussion in December on possible Section 101 fixes. While that meeting might have laid the divisions bare, Tillis and Coons are moving ahead with roundtable No. 2 on Thursday, this time with Rep. Doug Collins, the ranking Republican member of the House Judiciary Committee, taking part as well.

Drinker Biddle partner Bob Stoll hailed the creation of the subcommittee and said he wouldn't be surprised if, in addition to Section 101, it eventually explores other hot button issues for patent owners such as the on-sale bar, the standard for obtaining injunctive relief, and some of Coons' proposals for reforming PTAB proceedings. “If you've got a subcommittee that's specific to the subject matter, you've got more interest in hearing things, doing things, moving things,” Stoll said.

Josh Landau, patent counsel at the Computer and Communications Industry Association, said that even if the Senate can meet the challenge of coming up with a satisfactory legislative fix, it would likely be a tough sell in the Democratic-controlled House Judiciary Committee. “They feel that they have more important things to pursue than patents over the next couple of years,” he said.

The tech industry has lost some of its champions on House Judiciary, including former chairman Bob Goodlatte and IP subcommittee chair Darrell Issa. But early hearings suggest some of the new members aren't eager to cut the life sciences industry any breaks.

Even ranking member Collins, who is sympathetic to patent owners' arguments, has described a Section 101 fix as a multi-year project, similar to the Music Modernization Act that passed Congress last fall, Landau said.

Landau noted that there has been recent change on the Section 101 front, including new guidelines for patent examiners issued by the PTO in January. It might be wise to give those changes some time to take effect before tinkering with the statutory definition, he said.

Congress Members Speak Out on Qualcomm ITC Case

With the partial shutdown of the federal government over (at least until next week), the International Trade Commission is back in business. That means Qualcomm's effort to block Intel-supplied iPhones from being imported into the United States is once again live.

Landau notes at his Patent Progress blog that members of Congress have been making their voices heard on the case. He's rounded up five letters from some 18 senators and representatives who argue an exclusion order would disserve the public interest.

They include Northern California Reps. Zoe Lofgren, Anna Eshoo, Eric Swalwelland Doris Matsui, whom I would expect to oppose. But also signing a letter were Freedom Caucus Chair Mark Meadows and GOP House Judiciary members Ken Buck and Matt Gaetz.

“Allowing free-market principles to govern the baseband chipset market will encourage further development of innovative 5G technologies and further spur competitive pricing,” their letter states. “However, allowing Qualcomm's exclusion order to take effect will only serve to remove Qualcomm's lone competitor in the baseband chipset markplace and increase risks to our economic and national security.”

Qualcomm, meanwhile, gets support from former Federal Circuit Chief Judge Paul Michel. He writes in a Dec. 12 letter that denying an exclusion order would send “a doubly negative message on invention: companies may rely on infringement-based business models rather than pursuing the hard work of finding an alternative pathway to invention, while those who do the initial research and development to create inventions can have no expectation that their rights will be protected.”

Fed Circuit Rethinking Eligibility of GUI Patents

Say you hold some valuable patents on an online trading platform. A jury has found them worth $16 million. A district judge rules them eligible as a matter of law under Section 101, and the Federal Circuit affirms.

You'd think those patents would be pretty safe from Section 101 attack by that point, right?

Not for Trading Technologies Inc. Despite its successes in federal court, the Patent Trial and Appeal Board was less sanguine in a subsequent case brought by defendant Interactive Brokers Group (IBG).

The PTAB upheld the two patents in a 2-1 decision. Although not bound by the Federal Circuit's non-precedential decision, two PTAB judges found “no persuasive reason for us to ignore that guidance.” Judge Meredith Petravick dissented, saying that based on the record and arguments before the PTAB, she believed petitioner IBG had proven the patents ineligible.

The news was worse for Trading Technologies on two continuation patents. Although they shared an identical specification and many of the same claims, there was enough daylight for a 2-1 majority of the PTAB to cancel the patents, regardless of what the Federal Circuit had said about the parent patents.

So when the appeals of those PTAB decisions landed before the Federal Circuit, you'd think Trading Technologies would be in pretty good shape, right?

It didn't sound like it, based on some of the questions from nearly two hours of arguments on Feb. 7.

Baker & Hostetler partner Michael Gannon argued that the appellate court has already found the claims are not directed to abstract idea. That part of the Alice test—step 1—is a pure question of law that should remain constant, he argued.

But the Federal Circuit's previous decision isn't binding on IBG, Judge Kimberly Moore suggested. “It's not binding because a) it's [non-precedential] and b) these are different defendants. Even with regard to the identical patent, it's not binding,” she said.

“Your honor, you know, it's not binding,” Gannon conceded. “But if this court were to say two years ago, this patent meets step 1, and then two years later says magically it doesn't meet step 1, our patent system is in real trouble, if that's the result.”

Moore didn't sound persuaded. “It's got to be the case that different defendants can come along with different arguments and different evidence and get a redo,” she said. “That's the way our system works.”

Moore might just have been yanking Gannon's chain. They did have nearly two hours of argument time to fill, after all. But one thing I'm pretty certain of is that Trading Technologies is not going to win on its takings claim, as I wrote in National Law Journal here.

Trading Technologies argues that covered business method review—particularly when applied retroactively to pre-America Invents Act patents—leads to unconstitutional takings under the Fifth Amendment. That's an issue the Supreme Court expressly left dangling in its Oil States decision last year.

But while Moore and her colleagues posed several questions about the justiciability of the issue, they asked virtually none on the merits. In my experience, if judges are going to rule a statute or a procedure unconstitutional, they usually sound a clear warning during oral arguments.

Robert Allen to Pierce Bainbridge

Another high-profile name has left McKool Smith's California offices. Copyright litigator Robert Allen, one of the primary players in musical artists' efforts to claim royalties for pre-1972 sound recordings, has joined Pierce Bainbridge Beck Price & Hecht.

“I think it was time to move to a sort of a firm that was on more of the cutting edge of the area that I practice,” he told my ALM colleague Xiumei Dong.

It's hard to imagine a firm being more on the cutting edge of intellectual property law than McKool Smith. But the firm has seen a few high-profile departures on the West Coast in the last few months. A 13-attorney group led by Courtland Reichman and Sarah Jorgensen opened their own shop in October, and Larry Hadley joined Glaser Weil Fink Howard Avchen & Shapiro in November.

None were McKool Smith lifers. Hadley arrived in the 2011 merger with Hennigan Dorman; Reichman and Jorgensen had joined in 2012 from Alston & Bird; and Allen had signed on with McKool in 2015.

“It's a reality of the legal business that a firm of our scale and stature will see people come and go from time to time,” McKool Smith said in a statement. “We wish Robert the best in his new venture.”

Before his time at McKool, Allen spent more than a decade as the senior vice president and head of business and legal affairs at Universal Music Publishing Group.

He helped litigate a class action brought by Flo & Eddie against SiriusXM that resulted in a settlement of $25 million plus future royalties. He also persuaded the Ninth Circuit last summer that pre-1972 recordings, even if they've been digitally remastered for CDs during the 1980s and 1990s, are governed by the pre-1972 copyright framework.

That's all from Skilled in the Art for this week. I'll be on hiatus Friday, but I'll see you all again Tuesday.