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Federal Circuit Holds Appointment of PTAB Judges Violates the Constitution, Vacates and Remands Final Written Decision

In a decision with potential far-reaching implications, Arthrex, Inc. v. Smith & Nephew, Inc., the Federal Circuit held Thursday that appointments of Administrative Patent Judges (“APJs”) of the Patent Trial and Appeal Board’s (“PTAB” or “Board”), who administer inter partes reviews (“IPR”), post grant reviews (“PGR”), and covered business method (“CBM”) reviews, violated the Appointments Clause of the U.S. Constitution.  As a result, the Federal Circuit remanded the final written decision in Arthrex back to the PTAB and ordered a new panel be constituted to rehear the IPR.  However, rather than strike the entire authorizing statute, the Federal Circuit severed a portion of the statute in an attempt to avoid crashing the entire statutory scheme.  We have already seen recent final written decisions remanded back to the PTAB in light of Arthrex.

The decision came from Arthrex, Inc.’s appeal from a final written decision holding certain claims of its U.S. Patent No. 9,179,907 unpatentable as anticipated.  On appeal, Arthrex argued that the appointment of the Board’s APJs by the Secretary of Commerce as proscribed by Title 35 violated the Appointments Clause of the U.S. Constitution because APJs are “principal officers” who must be, but were not, appointed by the President with the advice and consent of the Senate.  The Federal Circuit agreed, vacating and remanding the final written decision at issue on this basis.

“Officers of the United States” are those officials who exercise significant authority pursuant to the laws of the United States.  Given APJs’ powers to oversee discovery, apply the rules of evidence, hear oral arguments, and ultimately decide the patentability of patent claims, it was undisputed that APJs are officers of the United States.  The issue before the Federal Circuit boiled to down to whether APJs should be considered principal or inferior officers—the former requiring appointment by the President, with advice and consent of the Senate, rather than merely the Secretary of Commerce.

The Federal Circuit determined that, as the statute was written, APJs were indeed principal officers.  There are three primary factors considered to determine whether an official is principal or inferior, referred to as the Edmond factors: (1) whether an appointed official has the power to review and reverse the officers’ decision; (2) the level of supervision and oversight an appointed official has over the officers; and (3) the appointed official’s power to remove the officers.  The only two presidentially appointed officers that provide direction to the USPTO are the Director and the Secretary of Commerce.  The Court concluded upon review of the Edmond factors that neither the Director of the U.S. Patent and Trademark Office (“USPTO”) nor the Secretary of Commerce, individually or combined, exercise the sufficient direction and supervision over APJs to render them inferior officers.

With regard to the Review Power, the Court noted that “[n]o presidentially-appointed officer has independent statutory authority to review a final written decision by the APJs before the decision issues on behalf of the United States.”  It found that the Director’s ability to act as an intervenor in appeals to the Federal Circuit and convene the Precedential Opinion Panel were insufficient to render APJs inferior officers.

With regard to the Removal Power, the Court noted that the Secretary of Commerce and the Director lack unfettered removal authority.  The Court rejected the Government’s analogy of the Director’s power to designate a panel of APJs to the power of the Judge Advocate General in Edmond to remove a military judge without cause.  It reasoned that under Title 35, the Director has the authority to remove an APJ “only for such cause as will promote the efficiency of the service.”  The Court determined that because the APJs issue decisions that are final on behalf of the Executive Branch, that are not reviewed by the Director, and cannot be removed without cause, the supervision and control over APJs by appointed Executive Branch officers weighed in favor of finding the APJs principal officers.

Based on the weighing of the Edmond factors, the Court determined that the APJs are principal officers required to be appointed by the President.  To remedy the unconstitutional appointment of the APJs, rather than strike the entire statutory scheme, the Court severed the portion of the statute controlling APJs’ removal, such that the Director can remove APJs at will.

If the Supreme Court is to hear this issue, it is possible it will find the Federal Circuit’s holding insufficient to remedy the issue the panel identified. While allowing removal of APJs without cause addresses the final Edmond factor (whether an appointed official can remove the officer), it does nothing to address the Director’s lack of power of review over the APJ’s decisions discussed at length by the Federal Circuit.  Arguably, the Federal Circuit’s surgical severing of the removal restrictions of APJs from the statute does not completely remedy the Appointments Clause deficiency identified by the Federal Circuit.  It remains the case that the Director does not have authority to review each final written decision; and even if the Director convened a Precedential Opinion Panel, he would remain one of many panelists rendering a decision, with no guarantee that the Director’s view would be in the majority.

What is clear is that we can certainly expect that all appeals from final written decisions invalidating patent claims currently pending before the Federal Circuit will include an Appointments Clause challenge in their briefing in an attempt to vacate and remand the decision.  Until the Federal Circuit’s invalidation of the removal restrictions of APJs, apparently all inter partes review decisions were issued by a panel of judges that were not constitutionally appointed at the time the decision was rendered, thus subjecting those decisions to the same remedy applied here.  In the meantime, a petition for en banc review is certainly forthcoming, as well as a petition for Supreme Court review of that en banc decision.  This shakeup of inter partes review practice is not even close to over, and we will continue to monitor this major development.

©1994-2023 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume IX, Number 308

About this Author

Michael C. Newman, Intellectual Property Attorney, Mintz Levin,Patent Litigation Federal Circuit Appeals International Trade Commission Federal District Court Strategic IP Monetization & Licensing

Michael represents companies in complex intellectual property disputes, with a particular focus on Section 337 investigations before the US International Trade Commission (ITC). His experience spans from pre-litigation investigation and litigation, to appeals before the Court of Appeals for the Federal Circuit. In addition, Michael has had extraordinary success representing patent owners in inter partes review proceedings before the Patent Trial and Appeals Board (PTAB).

Michael represents a broad range of clients in cases involving such diverse technologies as integrated...

Daniel B. Weinger Patent Litigation Attorney Mintz Law Firm

Daniel's practice in intellectual property focuses on patent litigation, both at the International Trade Commission and the Federal District Courts. Daniel has participated in all phases of patent litigation, including active engagement in multiple evidentiary hearings at the International Trade Commission. He has done work in a variety of technology areas, including computer software, software architecture, GPS, network devices, semiconductors, converged devices, and LED lighting.

Prior to joining Mintz Levin, Daniel worked as a database...

Tiffany Knapp, Mintz Levin Law Firm, Intellectual Property Attorney

Tiffany concentrates her practice on intellectual property litigation, with an emphasis on patent cases. She uses her background in computer science and mathematics to help clients in matters at the International Trade Commission and in Federal District Courts.

Prior to joining Mintz as an Associate, Tiffany was a law clerk to Clerk Joseph Stanton of the Massachusetts Appeals Court. During her last year in law school, prior to graduation, Tiffany worked as an Intern to Mintz’s IP practice. She assisted with the preparation of and research for...

Courtney Herndon, intellectual property lawyer, Mintz Levin,Patent Litigation International Trade Commission Federal District Court Strategic IP Monetization & Licensing

Courtney is an Associate in the intellectual property section. Before joining Mintz Levin, Courtney clerked for Associate Justice Geraldine Hines of the Massachusetts Supreme Judicial Court and Associate Justice Vickie L. Henry of the Massachusetts Appeals Court. 

During law school, Courtney served as a judicial intern to Judge William G. Young of the United States District Court, District of Massachusetts, and to Justice Hines (then an Associate Justice of the Massachusetts Appeals Court), conducting legal research, preparing bench memoranda,...