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Federal Circuit Rules That Appointment Of PTAB Judges Violates The Constitution

Last week, a three-judge panel of the U.S. Court of Appeals for the Federal Circuit held in Arthrex, Inc. v. Smith & Nephew that the appointment of Administrative Patent Judges (APJs) to the Patent Trial and Appeal Board (PTAB) by the U.S. Secretary of Commerce violates the Appointments Clause of the Constitution. 

In the original case, Smith & Nephew challenged via an inter partes review (IPR) Arthrex’s patent claims regarding a knotless suture securing assembly. The PTAB found the challenged claims to be unpatentable. On appeal, Arthrex argued that the APJs who presided over the IPR were not constitutionally appointed, specifically claiming that APJs are “principal officers” and, as such, must be appointed by the president. The Federal Circuit agreed, vacating the board’s finding of unpatentability and remanding the case to a new panel of APJs.

Likening APJs to special trial judges from other executive agencies that have significant authority to issue final written decisions, oversee discovery and conduct trials, the Federal Circuit held that APJs are “officers.” Next, it analyzed whether APJs are “principal officers” or “inferior officers.” After engaging in a lengthy discussion about the role and powers of APJs, as well as the limitations on their removal from office, the Federal Circuit concluded that they were “principal officers:”

The lack of any presidentially-appointed officer who can review, vacate, or correct decisions by the APJs combined with the limited removal power lead us to conclude … that these are principal officers. … The lack of control over APJ decisions does not allow the President to ensure the laws are faithfully executed because “he cannot oversee the faithfulness of the officers who execute them.”

Having concluded that the current structure of the board is unconstitutional, the court turned to the appropriate remedy. After considering several possibilities, the court determined that the “narrowest remedy” would be to sever the statutory removal protections afforded to APJs so that the Secretary of Commerce could remove them without cause. 

On remand, the court held that a new panel of APJs must be designated and a new hearing granted. Interestingly, the court left “to the Board’s sound discretion whether it should allow additional briefing or reopen the record in any individual case.”

Given the significance of the panel’s decision in Arthrex, it is likely not the last word on the subject. The decision is ripe for further review by the full Federal Circuit, or possibly even the U.S. Supreme Court. In the meantime, the impact should be “limited to those cases where final written decisions were issued and where litigants present an Appointments Clause challenge on appeal.” 

For any pending appeal of a final board decision, an appellant interested in raising an Appointments Clause challenge should consider doing so at the earliest opportunity or risk waiving the argument. Before doing so, however, the party should weigh the pros and cons of proceeding before a new panel, including associated costs and delay. The party should bear in mind that there is no guarantee a new panel will reach a different result. Moreover, if the original PTAB panel’s error is clear, it may make more sense to proceed with the current appeal than to seek remand and give a new panel the chance to correct the error. 

© 2020 BARNES & THORNBURG LLPNational Law Review, Volume IX, Number 308


About this Author

David Kelly, IP Attorney, Barnes Thornburg Law Firm

David has served as opinion and due diligence counsel for Fortune 100 companies and managed both domestic and international patent prosecution dockets.

He has deep IP litigation experience representing plaintiffs and defendants in federal district court and before the U.S. Patent and Trademark Office and the U.S. Court of Appeals for the Federal Circuit.

David has represented clients at virtually all levels of litigation, including dismissals, summary judgment and successful trials and appeals.

A noted IP thought leader, David has provided commentary in leading...

 Irina Sullivan BTLaw Chicago IP Law

An electrical engineer with hands-on work experience, Irina focuses her practice on preparing and prosecuting patent applications for electrical hardware and software systems. This experience allows her to handle invention disclosures and provide support and guidance through virtually all stages of the application drafting and prosecution process.

In the course of her practice, Irina has prepared and prosecuted over 100 patent applications across a variety of areas, including digital signal processing, computational and numerical models, machine learning, encryption and identity verification methods, speech recognition and natural language processing, wireless and network communications, image processing, augmented reality environment implementations, Internet of things (IoT), antenna design, semiconductor fabrication methods, and embedded system design.

For various patent litigation matters, Irina conducts discovery and due diligence searches and performs legal research. Of critical value to smaller clients and individual inventors, Irina conducts prior art and state of the art searches.

Before joining Barnes & Thornburg, Irina practiced at a bicoastal IP boutique law firm. Prior to law school, Irina amassed more than five years of engineering experience with General Motors Corporation as a service engineer working with advanced serviceability of design chassis and as a brand quality manager for advanced propulsion systems.

Irina is not regularly admitted to practice in the local courts of Illinois.