Executive Summary

In a string of appeals from the Patent Trial and Appeal Board (“PTAB”), the Court of Appeals for the Federal Circuit has called into question the constitutional legitimacy of numerous inter partes and – as of this week – ex parte proceedings from the PTAB’s administrative patent judges (“APJs”). It is now up to the Supreme Court to take the stage, should it so choose, and decide whether those APJs were constitutionally appointed such that their decisions should stand. Should the Supreme Court grant certiorari, its ultimate decision could give many patent owners¹ who lost at the PTAB the chance to have their ex parte and inter partes cases reheard. 

Arthrex, Inc. v. Smith & Nephew, Inc.

During an inter partes review before the PTAB in May 2018, a panel of three APJs cancelled several claims of a patent owned by Arthrex, Inc. Arthrex appealed the PTAB’s decision to the Federal Circuit, and included a challenge to the appointment of the APJs by the Director of the United States Patent and Trademark Office (“USPTO”).²

In particular, the issue before the Federal Circuit was whether the appointment of the Article I APJs was constitutional under the Appointments Clause of the U.S. Constitution.³ The Appointments Clause sets out two types of government officers: 1) “principal officers” who are appointed by the President and confirmed by the Senate (e.g., federal judges and ambassadors); and 2) “inferior officers” who can be appointed by department heads.⁴ Because APJs are not appointed by the President, their appointments would be unconstitutional if they were deemed to be principal officers.

Evaluating the three factors laid out by the Supreme Court in Edmond v. United States, 520 U.S. 651, 662-63 (1997), the Federal Circuit ultimately concluded that APJs were serving as principal officers in violation of the Appointments Clause due to “[t]he lack of any presidentially-appointed officer who [could] review, vacate, or correct decisions by the APJs,” combined with the limited power to remove the APJs, despite the Director’s exercise of “oversight authority that guide[d] the APJs procedurally and substantively[.]”⁵ The Court thus remanded the case back to the PTAB to be reheard in front of a new panel of APJs, and opined that “the narrowest viable approach to remedying the violation of the Appointments Clause” was to sever the removal protections applied to APJs.⁶

Since the Federal Circuit’s decision in Arthrex, the United States government has petitioned the Supreme Court for certiorari, requesting reconsideration of (i) whether the PTAB’s APJs were unconstitutionally appointed principal officers, and (ii) whether Arthrex had forfeited its constitutional argument by not raising it before the PTAB. If the Supreme Court determines that Arthrex waived its constitutional challenge, then the practical effects of the Federal Circuit’s Arthrex decision could be substantially lessened because parties who did not argue that constitutional defect before the PTAB would not be entitled to raise that challenge on appeal.

Caterpillar Paving Prods. v. Wirtgen Am., Inc.

To further limit the likely impact of Arthrex, the Federal Circuit recently held that Arthrex forecloses any Appointments Clause challenges for PTAB decisions issued after the date of the Arthrex decision (Oct. 31, 2019).⁷ In that case, patent owner Caterpillar lost at the PTAB, but the APJs issued their final written decision after the Federal Circuit’s Arthrex decision. On appeal, Caterpillar argued that the unconstitutionally appointed APJs, as identified in Arthrex, affected not only the PTAB’s final written decision, but also the year of trial proceedings leading up to that decision. But the Federal Circuit disagreed, holding that “The court in Arthrex considered and rejected that argument, expressly limiting its holding ‘to those cases where final written decisions were issued.’”⁸ Specifically, in the Arthrex decision, the Federal Circuit removed one of the employment protections afforded to PTAB APJs, which had restricted their removal “only for such cause as will promote the efficiency of the service.”⁹ 5 U.S.C. § 7513(a). This change to effectively “at will” employment status purportedly makes the PTAB APJs inferior officers, and thereby arguably remedies the constitutional infirmity in their appointment from the date of the Arthrex decision going forward.

In re: Boloro Global Ltd.

On Tuesday, July 7, 2020, the Federal Circuit extended its ruling in Arthrex to ex parte proceedings.¹⁰ In this recent case, Boloro Global Limited moved to vacate and remand an underlying PTAB decision in three consolidated ex parte appeals in which a panel of APJs affirmed the examiner’s rejections of Boloro’s pending patent applications.¹¹ The USPTO argued that, unlike with inter partes reviews, in ex parte proceedings the Director possesses complete control over the initial examination and could at any time have directed the issuance of Boloro’s patent applications before the ex parte appeals. But the Court, relying on its general determination in Arthrex that APJ appointments were unconstitutional, decided that ex parte proceedings conducted by APJs should be treated in the same manner as inter partes proceedings.¹²

Given the Federal Circuit’s brief opinion in Boloro, the Court may be deferring to the Supreme Court to issue a more definitive ruling on the Appointments Clause issue and opine on the constitutionality of both inter partes and ex parte proceedings held before APJs. Thus, the legal dance continues . . . stay tuned to see if the music stops with the Supreme Court.

¹ In Ciena Corp. v. Oyster Optics, LLC, 958 F.3d 1157 (Fed. Cir. Jan. 28, 2020) (O’Malley, J.) (reissued as precedential, 2020 U.S. App. LEXIS 14318 (May 5, 2020)), the Federal Circuit held that a petitioner’s decision to avail itself of the IPR process constituted a waiver of any Arthrex-type constitutional challenge to the appointment of the PTAB’s APJs.

² Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. Oct. 31, 2019) (Moore, J.).

³ Id. at 1327.

⁴ U.S. Const. art. II, § 2, cl. 2.

⁵ Arthrex, 941 F.3d at 1335.

⁶ Id. at 1337.

⁷ Caterpillar Paving Prods. v. Wirtgen Am., Inc., 957 F.3d 1342 (Fed. Cir. May 6, 2020) (Dyk, J.).

⁸ Id. at 1343.

⁹ Arthrex, 941 F.3d at 1338.

¹⁰ In re: Boloro Global Ltd., No. 19-2349 (Fed. Cir. July 7, 2020) (Dyk, J.).

¹¹ Id. at 2.

¹² Id. at 3.