PublishedOctober 16, 2020

Cert Granted in Arthrex Case On PTAB Appointments

This week, the Supreme Court granted certiorari in a set of related cases between Arthrex and Smith & Nephew, as well as the federal government.  The cases revolve around one fundamental question: are judges of the Patent Trial and Appeal Board (PTAB) principal officers of the United States?  That question controls the constitutionality of their appointment.  A principal officer must be appointed with the advice and consent of the Senate; an inferior officer’s appointment can be delegated to a department head.  PTAB judges are appointed by the Secretary of Commerce, not via advice and consent, meaning that they are only properly appointed if they are inferior officers.

While this case focuses on PTAB judges, it seems likely that the Court took it to more broadly explain the distinction between inferior and principal officers, a distinction likely to have impacts throughout the federal government.

Smith & Nephew v. Arthrex

After being sued, Smith & Nephew successfully challenged Arthrex’s patent at the PTAB.  As part of its appeal, Arthrex argued that the PTAB judges were not constitutionally appointed and their decision was therefore invalid.  A Federal Circuit panel, composed of Judges Moore, Reyna, and Chen, decided that the Director of the Patent and Trademark Office lacked sufficient supervision over PTAB judges to render them inferior officers.  Without remedy, this would have rendered the PTAB unconstitutional.

To remedy this, the Federal Circuit panel decided that the simplest fix was to strip PTAB judges of their civil service protections, enabling the Director to fire judges at will as a method of control.  With this in place, the Arthrex panel found that the modified PTAB was composed of inferior officers and thus constitutional.  In denying a petition for rehearing en banc, two Federal Circuit judges explained that the panel opinion was incorrect and the Director has significant ability to supervise and control PTAB judges.  

In fact, we’ve seen exactly this play out in the present PTAB, where judges have increasingly denied institution of inter partes reviews for non-merit reasons based on the Director’s expressed preference and policy of doing so.  Similarly, the Director has set PTAB policy on same-party joinder, the standard at institution for status of a reference as a printed publication, and whether the Board may consider a ground of unpatentability the petitioner did not raise against amended claims.  In each of these instances, the Director actively stepped into the case and controlled the outcome via the use of precedential opinion panels.

Arthrex in the House

The House Judiciary Committee quickly responded to the Arthrex decision, holding a hearing on the implications of the decision.  Multiple witnesses expressed concerns about the decision and the potential hazards of making PTAB judges fireable at will.  None felt it was good policy.  Instead, all suggested making PTAB decisions explicitly reviewable, whether by the Director or some other appointee or appointees.  However, there was relatively little attention given at the hearing to the key question of whether PTAB judges are inferior or principal officers.  While the House has not yet introduced legislation to address this concern, such legislation could potentially moot much of the case.

Arthrex at the Supreme Court

The Court granted certiorari on two questions—whether the judges of the PTAB are principal officers, and whether, assuming they are principal officers, the Federal Circuit’s remedy of severing civil service protections properly cured the defect.  (The Court passed on the third proposed question regarding whether the issue was waived.)

Much like previous major PTAB cases such as SAS and Oil States, this case is likely to attract a significant amount of attention from a wide range of amici.  And concerns raised in Cuozzo and Oil States about panel selection “shenanigans” a Director could employ might come back to suggest that the Director does in fact have sufficient ability to control the outcome of cases and thus that PTAB judges are inferior officers.

At the end of the day, I think that the Court will find that PTAB judges are inferior officers based on the Director’s significant direct and indirect abilities to control their work.  But if the Court reaches the opposite conclusion, I expect that Congress will act to fix the issue.  The only question is whether the sponsors would allow a bill that cleanly fixes the issue to be amended to include the bad ideas that opponents of the PTAB have been trying to push for years.

Josh Landau

Patent Counsel, CCIA

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

Follow @PatentJosh on Twitter.

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