Appropriateness Of APJ Appointments To Be Argued Monday In Arthrex

On Monday, the Supreme Court will hear oral argument in U.S. v. Arthrex (also referred to as Arthrex v. Smith & Nephew, one of the consolidated cases at issue).  The appeal, which will address whether the appointment of PTAB judges is constitutional under the Appointments Clause, is the most important patent case being heard by the Court this year, as a negative decision could potentially derail the PTAB’s work entirely.  

That’s not the outcome I expect, though.

Appointments Clause

Article II of the Constitution provides that the President “shall nominate, and by and with the advice and consent of the Senate, shall appoint … all other officers of the United States, whose appointments are not herein otherwise provided for, and which shall be established by law: but the Congress may by law vest the appointment of such inferior officers, as they think proper, in the President alone, in the courts of law, or in the heads of departments.”

This sets up two classes of officers: officers who must be appointed by the President with the advice and consent of the Senate, often referred to as “principal” officers, and “inferior” officers whose appointment does not require Senate approval.  PTAB administrative patent judges (APJs) are appointed by the Secretary of Commerce (a department head), and do not require Senate approval.

So the basic question is: are PTAB judges principal officers or inferior officers?  If PTAB judges are principal officers, their appointments are unconstitutional.  If the APJs are inferior officers, no problem.

Principal vs. Inferior

While there is no single test to be applied to determine if an officer is a principal or inferior officer, there are two general concerns that show up in the case law.  The first is whether the officer is subject to the supervision, direction, and/or control of a Senate-confirmed principal officer.  The second is whether an officer has policy-making powers that set the policy of the U.S. government.

With respect to the first concern, supervision and control, the question of the ability to remove an officer from their job has been seen as a particularly important factor.  However, while the ability to remove is important, it isn’t the sole way in which supervision and control can be exerted.  The ability of a principal officer to direct the fashion in which an inferior officer works is also important, as is the ability of a principal officer to set the policies which the inferior officer applies as part of their work.

With respect to the second concern, the issue is whether the policy of the United States is set by a politically accountable official, either elected or subject to confirmation by an elected official, or whether policy can be set by officers who are not subject to the same political accountability.  This general concern with accountability provides an additional guideline.  The ability to set U.S. government policy is a signal that an officer is a principal officer, while lack of such ability is a signal that the officer is an inferior officer.

In listening to the Arthrex arguments, the crucial piece will likely be determining if the level of direction and control that the USPTO Director exerts over APJs is sufficient.  CCIA submitted an amicus brief arguing that the Director’s level of supervision and control is sufficient and is far in excess of the level of supervision and control provided to officers previously deemed inferior.

Applying the Test

The Director of the U.S. Patent and Trademark Office is a Senate-confirmed appointee.  The Director supervises the APJs of the PTAB in a number of ways.  

The Director sets the policies that APJs follow in their work, both substantive and procedural.  

The Director determines which APJs hear any particular case, and in fact can pull an APJ off of a case for any reason at any point and substitute a different APJ.  The Director can even refuse to assign an APJ to any cases, effectively removing them from their exercise of authority.  

While the Director cannot directly re-hear a decision of a PTAB panel by themself, the Director can order re-hearing of any decision of the PTAB with a panel composed of the Director and two or more other APJs of the Director’s choosing.

And finally, the Director can remove an APJ from their office for cause, when removal would support the cause of “the efficiency of the service,” providing a removal authority.

APJs also lack any ability to set policy for the U.S. government, another flag that they are inferior officers.  While they rule in individual cases, their decisions lack any policy authority and only become precedential if the Director approves them.  An APJ cannot issue any form of general pronouncement of how patent law will be interpreted, even within the limited context of AIA trials.

The Court likely took up the Arthrex case to provide it with an opportunity to provide more clarity on the dividing line between a principal and inferior officer.  But given the significant control the Director exercises over APJs, the Court should ultimately determine that PTAB appointments are constitutional as-is and overturn the Federal Circuit.

Joshua Landau

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.