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Federal Circuit Rejects Legitimacy of PTAB Judge Appointments: What's Next?

By Procopio Partner Robert H. Sloss

On October 31, which happens to be Halloween, the Federal Circuit issued a potentially frightening decision essentially holding that judges of the Patent Trial and Appeal Board (“PTAB”) had not been properly engaged pursuant to the Appointments Clause of the United States Constitution and vacating the decision in the case before it, Arthrex, Inc. v. Smith & Nephew, Inc., Case No. 2018-2140 (Oct. 31, 2019). Although the decision could have potentially macabre implications with respect to some proceedings initiated under the America Invents Act (“AIA”), the Court attempted to limit the reach of its decision to a very narrow set of cases.

The case began simply enough. Smith & Nephew filed a petition for inter partes review (“IPR”) with the PTAB, alleging that claims of a patent owned by Arthrex relating to “a knotless suture securing assembly” are invalid. Following its standard procedures, the PTAB instituted an IPR, and the three PTAB judges on the IPR panel determined that the challenged claims were invalid. 

On appeal, things took an unusual turn. Arthrex argued to the Federal Circuit, among other things, that the administrative patent judges (“APJs”) appointed to serve on the PTAB had not been installed in accordance with the Appointments Clause of the Constitution and that, therefore, their decision was null and void. The Federal Circuit panel that heard the appeal (Judges Moore, Reyna and Chen) agreed, vacated the PTAB’s decision of invalidity of the challenged patent and remanded for the matter to be decided by “a new panel of APJs.” Interestingly, the Court held that the institution of the IPR had been constitutionally sound but that a new hearing on the ultimate issue of patentability had to occur.

The Court’s decision consists of a rather dense analysis of the Appointments Clause and the statutory framework that governs the installation and duties of APJs. In essence, the Appointments Clause of Article II of the Constitution calls for the President to nominate and the Senate “to advise and consent” certain government officials as “principal Officers,” except that Congress may allow those who qualify as “inferior Officers” to be appointed by “the Heads of Departments.” Because under the AIA APJs are appointed by the Secretary of Commerce in consultation with the Director of the U.S. Patent and Trademark Office (USPTO) (35 U.S.C. § 6(a)), the question faced by the Court was whether such Federal appointees qualify as “principal” or “inferior” officers. 

To answer that question, the panel applied the three-factor test articulated by the Supreme Court in Edmond v. U.S., 520 U.S. 651 (1997):

(1) Can an APJ’s decision be reviewed such that she herself “cannot independently render a decision on behalf of the United States”?  (2) To what extent is the APJ’s work “supervised or overseen by another Executive officer”? (3) Are there limits on the removal of APJs such that they are effectively controlled by an Executive officer? 

The Federal Circuit concluded that the answers to factors (1) and (3) were “no” and thus that APJs are “principal” and not “inferior” officers. Consequently, since they were not nominated by the President with the advice and consent of the Senate, APJs did not pass constitutional muster.

Perhaps recognizing the devastation its decision might wreak on the thousands of pending AIA cases, the Court then set about trying to limit the reach of its ruling. First, it attempted to sever the unconstitutional aspects of the AIA in such a way as to “refrain from invalidating more of the statute than is necessary.” It did this by severing the part of 35 U.S.C. § 3(c) that restricts the Secretary of Commerce’s ability to remove APJs. (This was actually less straightforward than a simple removal of language from section 3(c), as that provision merely makes Officers of the USPTO subject to Title 5, and 5 U.S.C. § 7513(b) controls the removal of Officers. Accordingly, the Federal Circuit actually severed section 7513(b) as it applied to APJs.) However, this severance cannot affect cases already decided by a panel of unconstitutional APJs – including Arthrex, which the Court remanded for rehearing by a new, now-constitutional (as a result of Court waving its severance wand to immediately remove the offending language of the AIA) panel of APJs. To make this new panel’s job less onerous, the Court stated that the panel can decide the IPR based on the briefs already on file with the PTAB and without conducting a new PTAB hearing. 

The second way in which the Court tried to fence in its ruling was to hold that the decision pertained only “to those cases where final written decisions were issued and where litigants present an Appointments Clause challenge on appeal.” Presumably, very few cases that are now on appeal from the PTAB have raised the Appointments Clause issue, and for those cases that have been briefed, argued and submitted to the Federal Circuit, it is too late to present such a challenge. For those cases in which the PTAB has issued a final decision and which have not yet been finally submitted to the Federal Circuit, appellants may now consider seeking to add an Appointments Clause argument to their appeals. Some appellants who do not fall within the small group who benefit from the Arthrex opinion will undoubtedly push for ways to join that select group.

Initially, however, we must wait for the Arthrex case to play out, as the decision by the Federal Circuit panel may not be the last word on this subject. Smith & Nephew will almost certainly seek a rehearing en banc, and the party on the short end of that proceeding will likely file a writ of certiorari with the Supreme Court. In the meantime, parties who are involved in PTAB proceedings should analyze how Arthrex might apply to their case and act accordingly and should pay close attention to possible further developments regarding the constitutionality of APJs.


Robert H. Sloss is a Partner in Procopio's Silicon Valley office and a member of its Intellectual Property Litigation practice. He advises clients on a matters pertaining to intellectual property counseling and litigation. Bob leverages his experience as a senior in-house lawyer at a major technology company to provide a unique set of skills to resolve clients’ legal disputes. He has broad experience in litigating patents related to a variety of technologies, including software, computer peripherals, mechanical devices and biotechnology, as well as matters involving copyright, trademark and trade secrets. Bob has appeared in courts throughout the U.S. and before the International Trade Commission and the Patent Trial and Appeal Board. He is admitted to practice in California State Courts, the U.S. Courts of Appeal for the Federal and Ninth Circuits, the U.S. District Courts for the Northern, Southern, Central and Eastern Districts of California, and the District of Colorado.