What Arthrex Could Mean for the PTAB Going Forward

18 November 2020 PTAB Trial Insights Blog
Authors: Randy J. Pummill Daniel R. Shelton George E. Quillin

Now that the Supreme Court has granted cert in Arthrex v. Smith & Nephew, patent owners and petitioners alike may be wondering what ramifications the Court’s decision may have on their proceedings.  In this article, we address several different scenarios based on possible outcomes from the Court.

As discussed in several earlier articles here and here, the Federal Circuit in Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320, held that PTAB judges were principal officers appointed in violation of the Constitution, and that the proper remedy was to judicially eliminate their for-cause removal protections.

The Supreme Court granted certiorari for two questions.  The first question is whether administrative patent judges (APJs) are principal officers who must be appointed by the President with the Senate’s advice and consent, or “inferior Officers” whose appointment Congress has permissibly vested in a department head. The second question asks, if APJs are principal officers, whether the court of appeals properly cured any Appointments Clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. § 7513(a) to those judges. (A third proposed question—whether the Appointments Clause challenge must be presented to the agency to preserve it for judicial review—was not granted cert in any of the Arthrex-related petitions but was recently granted in a pair of cases dealing with judges in the Social Security Administration.  Carr v. Saul, 19-1442, and Davis v. Saul, 20-105).  There are several possible outcomes based on the two Arthrex questions.

PTAB judges are deemed “inferior Officers”

Probably the simplest result from a Supreme Court decision would be if the Court holds that PTAB judges are “inferior Officers.” Under this holding, the PTAB would continue to operate as it has since its inception.  The 100s of appeals that were remanded to the PTAB after Arthrex, and held in abeyance by the Patent Office, would again be able to proceed to the Federal Circuit.  Arthrex and other Federal Circuit decisions based on Arthrex could be considered based on the individual issues of each case.

PTAB judges are deemed principal officers

If PTAB judges are deemed principal officers who must be appointed by the President with the Senate’s advice and consent, then the Court will move to the second question: Did the Federal Circuit properly cure the Appointments Clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. § 7513(a) to those judges?  If the Court travels this path, the outcome could affect other administrative judges, not least the judges in the other wing of the PTO house, the TTAB.

The Federal Circuit properly cured the Appointments Clause defect

A holding by the Court that the Federal Circuit properly cured the Appointments Clause defect would result in PTAB judge appointments being unconstitutional.  Under this result, the institution decisions for post grant proceedings may still be valid based on the Federal Circuit’s clarification in Arthrex that the underlying decision to institute the inter partes review “is not suspect” on remand, because the identified constitutional violation did not undermine the Director’s institution authority under 35 U.S.C. § 314. Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320, 1340.

Participants in post grant proceedings where a final written decision issued before the constitutional remedy in Arthrex was applied (the date of the Arthrex decision, October 31, 2019), and who properly raised and preserved the constitutional challenge, could move in Federal Circuit to have the final written decision vacated and have the case remanded to the PTAB for review by a new panel of properly-appointed PTAB judges. This would include the 100s of final written decisions that have already been vacated and are currently being held in abeyance by the PTAB.

The Federal Circuit did not properly cure the Appointments Clause defect

In a third scenario, the Supreme Court could hold that PTAB judges are principal officers under the current statutory framework, but the severance of the application of 5 U.S.C. § 7513(a) was improper.  In this scenario, the Court could look for other modifications to the statute that solve the constitutional conflict, such as by subjecting PTAB judge decisions to agency review before the decisions are given effect.  This approach would cement PTAB judges as inferior officers by ensuring sufficient political accountability of the officials that sign off on PTAB decisions, which would allow the cases held in abeyance to proceed to the CAFC. 

Alternatively, the Court could find that PTAB judges are principal officers under the current framework, but elect to leave the task of modifying the statutory framework to Congress, a potential solution suggested by Judge Dyk in his dissent of the opinion denying en banc rehearing of Arthrex, 953 F.3d 760, 769-771.  Judge Dyk took the position that Congress intended to create in the PTAB an impartial adjudicatory body, which necessitates that the PTAB judges be inferior officers and that Congress should be left to amend the statute as needed. 

More to Come

For additional analysis, return to PTAB Trial Insights blog after the initial merits briefs have been filed on November 25th.

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