In Arthrex Reply Brief, Government Reiterates and Stands Firm

10 February 2021 PTAB Trial Insights Blog
Authors: Randy J. Pummill George E. Quillin

Smith & Nephew and the United States filed their reply briefs on January 22. In its reply brief, the United States rebuts many of the positions taken by Arthrex in its initial merits brief. While Smith & Nephew, in its reply, also addressed many issues raised in amicus briefs, the United States focuses more directly on the arguments made by Arthrex.

In the Arthrex cases (docketed as 19-1434), Arthrex has argued that the key issue in determining whether an administrative patent judge (APJ) is a principal or inferior officer is whether that judge’s decisions are reviewable by a principal officer. Under this standard, Arthrex argues that the USPTO’s APJs are principal officers and that they must be appointed by the President with the advice and consent of the Senate.Additionally, Arthrex has argued that the Director’s exercise of power to control APJs (as the United States suggested in its initial brief), would be a violation of due process.

Rearguing APJs are Inferior Officers

The United States reiterates its position that under the current statutory scheme APJs are inferior officers while pushing back against Arthrex’s interpretation of the Court’s jurisprudence on the Appointments Clause.

The United States first argues that the Court’s prior decisions on the Appointments Clause only require that inferior officers be directed and supervised at some level,2 a standard that the United States argues is met by a combination of the powers held by the Secretary of Commerce and the Director of the USPTO.While the Secretary’s power to remove an APJ is limited to situations that “promote” the efficiency of the service,4 the United States argues that this is still a broad enough power to meet the standard set by the Court. Arthrex relied on Abrams v. Social Security Administration to argue that under the efficiency of the service standard, misconduct by an APJ, such as not following the Director’s policies, is not sufficient cause to dismiss an APJ.5 However, the United States points out that this case is not directly applicable, since the Social Security judge in question could only be dismissed for “good cause” under 5 U.S.C. § 7521, which is much stronger protection than APJs enjoy under § 7513.The United States takes the position that an APJ’s refusal to follow the Director’s instructions would be sufficient cause to remove the APJ, as misconduct by the APJ would have an adverse impact on the efficiency of the agency.7

The United States also highlights the Director’s ability to remove APJs from their judicial duties for any reason.8 Arthrex argued that removal from judicial duties alone is not sufficient and that, for an APJ to be an inferior officer, the Director must have the power to remove an APJ from office entirely.9 However, the United States points out that the Judge Advocate General in Edmond had these same limitations on removal powers, and yet the Court found that “the ability to remove administrative judges from their judicial assignments provided a powerful tool for control.”10 In addition, the United States argues, removal from judicial duties would not be a “vacation” as Arthrex put it,11 since the APJ could be assigned to other, non-judicial tasks.

The United States goes on to discuss how the Director is further able to control APJs through policies, “including by promulgating regulations governing the Board’s adjudicatory process, issuing binding policy directives, and determining what, if any, precedential weight a final Board decision will receive.”12 For example, the United States takes the position that the Director is properly able to terminate an IPR proceeding before a final written decision is issued.13 In this way, the Director can ensure that APJs are following policy guidance and can prevent a poor decision by a panel from being finalized.14

On Due Process and Public Franchises

One major theme in the Arthrex brief (and many of the amicus briefs filed in support of Arthrex) is that the Director’s use of power in this way would violate due process rights.15 The Court considered and rejected a similar argument in Oil States.16 Here, the United States questions how giving a principal officer review power of APJ decisions would cure a due process violation:17

“If it does not inherently offend due process for such an official to personally conduct or review every administrative adjudication, there can be no inherent due process problem when the same official selects which inferior officers will comprise an adjudicatory panel, publishes policy directives for those inferiors to follow, or exercises his other legitimate authority to supervise them—particularly where any final decision is subject to judicial review in an Article III court.”18

The United States, following the Court’s decision in Oil States, further states that it is not a due process violation to take a second look at the granting of a patent, as patents are “public franchises” and not private rights.19 The Secretary and Director, so the argument goes, have a valid interest in ensuring that the USPTO is granting patents in a consistent way, and IPRs are one way of doing so. Any unfairness, the United States argues, should be taken up in an Article III court, not through an invalidation of the powers that Congress has given to the Secretary and the Director.20

Working Out an Appropriate Remedy

Should the Court find that APJs are principal officers, the United States urges the Court to adopt the lower court’s remedy and strike the removal protections from APJs. Alternatively, the United States argues that the Court should consider striking 35 U.S.C. § 6(c).21 Doing so would allow the Director to review and reverse Board decisions.22

Arthrex asserted that the principle of constitutional avoidance should influence the Court to leave a solution to Congress, because while eliminating tenure protections may solve the Appointments Clause issue, it would not overcome the possible due process violations.23 The United States argues that if the Court does reach the issue of severability, constitutional avoidance has “no remaining role to play."24 Instead, constitutional avoidance should lead the Court to favor finding that APJs are inferior officers, since such a finding would avoid an Appointments Clause infirmity.25

Finally, the United States points out an alleged inconsistency in Arthrex’s arguments. Arthrex argued that to ensure that Congress’ intent in passing the AIA is preserved, a solution should be left up to Congress.26 Arthrex also argued that the IPR system should be declared unconstitutional. The United States asserts that these positions are incompatible, since destroying IPRs would certainly defy Congress’ intent.

Next Steps

Arthrex’s reply brief is due before February 21, 2021, and oral argument for the case is scheduled for Monday, March 1, 2021. Continue checking the PTAB Trial Insights Blog for analysis on these and future developments in the upcoming weeks.


1 Arthrex Br. at 34.

See Edmond v. United States, 520 U.S. 651, 663 (1997).

U.S. Reply at 6, 13-14.

5 U.S.C. § 7513

Arthrex Br. at 37 (citing Abrams v. Soc. Sec. Admin., 703 F.3d 538 (Fed. Cir. 2012)).

U.S. Reply at 7-8.

U.S. Reply at 6-7 (citing Cobert v. Miller, 800 F.3d 1340, 1351 (Fed. Cir. 2015)).

U.S. Reply at 8.

Arthrex Br. at 38.

10 U.S. Reply at 9 (quoting Edmond, 520 U.S. at 664.)

11 Arthrex Br. at 38.

12 U.S. Reply at 10.

13 U.S. Reply at 12.

14 U.S. Reply at 13.

15 See e.g. Arthrex Br. At 41-42.

16 Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 138 S. Ct. 1365 (2018).

17 U.S. Reply at 15-16.

18 U.S. Reply at 16 (citing Kalaris v. Donovan, 697 F.2d 376, 401 (D.C. Cir.)).

19 U.S. Reply at 16 (citing Oil States at 1374-1375).

20 U.S. Reply at 17.

21 U.S. Reply at 40-41.

22 U.S. Reply at 41.

23 Arthrex Br. at 62-64.

24 U.S. Reply at 39.

25 Id.

26 Arthrex Br. At 54.

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