Yesterday, the Supreme Court handed down its much-awaited decision—at least, much-awaited by people who care about patents and the Patent Trial and Appeal Board (PTAB)—in the consolidated U.S. v Arthrex, Arthrex v. Smith & Nephew, and Smith & Nephew v. Arthrex cases. And while the multiple parties and multiple opinions might look complicated, it’s actually a pretty simple opinion when it comes to the patent world. (It might have wider-ranging impacts in other areas of law.)
Let’s walk through it.
Roberts for the Majority
Writing for himself as well as Justices Alito, Kavanaugh, Barrett, and Gorsuch, Chief Justice Roberts describes the reasons why the Court finds the PTAB’s administrative patent judges (APJs) to be insufficiently supervised by a principal officer. While careful to never actually state whether the statute creates APJs who are principal officers improperly appointed or inferior officers exercising too much power, the majority effectively creates a new requirement for inferior officer status—the ability of a principal officer to review adjudicative decisions of inferior officers before they become final.
In other words, whichever way the principal/inferior line falls, there’s five votes that there’s a problem here.
Roberts for the Plurality
In the second portion of the primary opinion, Section III, Justice Roberts is again joined by Justices Alito, Kavanaugh, and Barrett. However, Justice Gorsuch does not join this section of the opinion.
Here, having identified a Constitutional problem, the plurality resolves the problem by finding a minimal remedy. Justice Roberts notes that in “every respect save the insulation of their decisions from review within the Executive Branch, APJs appear to be inferior officers—an understanding consistent with their appointment in a manner permissible for inferior but not principal officers.” Based on that Justice Roberts determines that Congress intended for them to be inferior officers and that, given the powers assigned the Director overall, the most consistent remedy is to provide the Directorial review required for the APJs’ exercise of power to be Constitutionally permissible.
There’s four votes in this portion of the opinion for the remedy of allowing the Director to directly review inter partes review (IPR) decisions. But a partial dissent agrees with the proposed remedy, as described below.
Gorsuch in Partial Dissent, Partial Concurrence
Justice Gorsuch, writing only for himself, complains that Oil States—a 7-2 decision—was wrongly decided and that IPR should not exist. Given this, it is perhaps unsurprising that he would vote to make the entire system unenforceable as a remedy to the Appointments Clause issue on which he joins the majority. He goes further, questioning whether the entire concept of statutory severance is permissible. Finally, he cites to ad hominem attacks by some amici that appear to argue that APJs are making decisions to benefit once and future employers, rather than on the basis of the law. Of course, those decisions are subject to review by the Federal Circuit and Supreme Court, and neither Justice Gorsuch nor the cited amici showed any indication that the decisions were actually legally incorrect.
In short, Justice Gorsuch’s partial dissent is simply a single voice claiming that IPR shouldn’t exist. While that voice might be popular with people who lost patents that never should have been issued, it appears to have garnered no interest from the rest of the Court.
Thomas in Dissent
In the first part of his opinion, Justice Thomas, joined by Justices Breyer, Kagan, and Sotomayor, explains why PTAB APJs are inferior officers. He notes that the Supreme Court has never before found an officer who Congress has decided should be appointed by the inferior officer process to be a principal officer. He notes that both the majority and the Federal Circuit effectively assumed that Congress intended APJs to be inferior officers, and calibrated their remedies accordingly. He describes the history of executive adjudication of patent rights, noting that inferior officers were assigned the responsibility of determining who was the true inventor in cases of disputes over who was first to invent something as early as the 1793 Patent Act. That role was reiterated in the 1836 Patent Act. Given that history and the realities of Directorial powers over APJs, Justice Thomas—joined by Justices Breyer, Kagan, and Sotomayor—would find that APJs are inferior officers and leave the America Invents Act (AIA) intact.
As Justice Thomas states, the fact that both the Federal Circuit and the Supreme Court “take so much care to ensure that administrative patent judges, appointed as inferior officers, would remain inferior officers at the end of the day suggests that perhaps they were inferior officers to begin with.”
In the second part of his opinion, writing only for himself, Justice Thomas elaborates on a problem he finds in the majority’s opinion—the remedy given is unsupportable under any theory the majority appears to have. Then, again only for himself, Justice Thomas asks whether at least one part of Edmond, a major Appointments Clause case, should be overturned or modified in light of the text of the Constitution and historical practice.
And while not proposing a severance remedy, Justice Thomas notes that the appropriate remedy would have either been to vacate the PTAB’s decision, if APJs are operating as illegitimately appointed principal officers, or to dismiss the case as improvidently granted if APJs are operating as inferior officers and the Director has the inherent power to review decisions, since no actual violation would have occurred and thus the Court would lack any authority to grant a remedy. Either way, while Justice Thomas might not join the plurality’s severance approach, he also does not appear to be a vote for setting aside the entire IPR statute.
Breyer in Partial Dissent, Partial Concurrence
Justice Breyer, joined by Justices Kagan and Sotomayor, notes his agreement with Justice Thomas’s conclusion that APJs are inferior officers. Justice Breyer goes on to note two additional reasons he would find APJs to be inferior officers.
First, Justice Breyer would defer to Congress. Justice Breyer would ask courts to provide some deference to the fact that Congress created this position as an inferior office. This dovetails with Justice Thomas’s note that the Supreme Court has never previously found an officer who Congress decreed should be appointed by the inferior officer process to be a principal officer.
Second, Justice Breyer advocates for a functional, rather than formal, approach to determining inferior officer status. (This is perhaps not surprising given Justice Breyer’s oft-noted tendency to prefer balancing tests over bright line rules.) Instead of a formalist analysis of powers of an office, Justice Breyer would examine the reasons why Congress chose to create a particular statutory scheme and the impacts that would follow from changes to it. Justice Breyer would permit Congress to create a body that would be able to issue decisions that are correct on complex technical matters without being subject to inappropriate political influence, as it attempted to do with the AIA. Finally, Justice Breyer notes that the executive and legislative branches are more likely than the judicial branch to have an understanding of mechanisms of control by which superiors can direct their subordinates, a task judges have relatively little experience with. (Justice Breyer would know, given his 41 years of service in the federal judiciary.)
Given all this, Justice Breyer would find APJs to be inferior officers. However, recognizing that a majority of the Court has determined otherwise, Justices Breyer, Sotomayor, and Kagan recognize that the proposed solution is the most narrowly tailored solution available to the Constitutional harm identified by the majority. As such, the three Justices join the majority with respect to the remedy.
The Final Score
So, summing it all up? Five Justices found the appointment scheme for PTAB judges to be Constitutionally impermissible. But seven Justices found the remedy—striking the three-judge requirement to the extent required to permit Directorial review of IPR decisions—to be the correct remedy. And only Justice Gorsuch would have set aside the IPR system entirely. IPR appears to be here to stay, with at most minor changes.
What will it mean in practice? Well, as CCIA’s amicus brief noted, the Director already had tremendous power in practice to affect the outcome of individual cases. Enough power that the Chair and Ranking Member of the House Judiciary Committee’s IP Subcommittee asked the GAO to investigate whether that power had been abused. Given that power, it seems unlikely that there will be a significant number of cases receiving formal Directorial review that weren’t already subject to it in practice. After two years of Arthrex working its way through the courts, the biggest end result might just be that now the Director will have to be on record when they make changes, rather than doing it behind the scenes.
And that, as Senator Leahy noted, makes the choice of the next Director all the more important. That means a Director who will enforce the law as written, not his personal preferences. As Senator Leahy stated, “[w]hether an invention is patentable should not depend on who is President or who is head of the PTO.”
In choosing the next Director, the Biden Administration should take this advice to heart.