ARE PTAB Law Alert:Petitioners, Patent Owners and the Government Are All Asking the Full Court of the Federal Circuit to Reconsider Arthrex and its Progeny

On Thursday, October 31, 2019, the U.S. Court of Appeals for the Federal Circuit held in Arthrex, Inc. v. Smith & Nephew, Inc. that Administrative Patent Judges (“APJs”) at the Patent Trial and Appeal Board (“PTAB”) are “principal officers” in light of how the Patent Act (Title 35) has been enacted and structured. As such, according to the panel, the appointment of APJs by the Secretary of Commerce as set forth in Title 35 violates the Appointments Clause, U.S. CONST., art. II, § 2, cl. 2. Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019).

In an effort to remedy the purported constitutional violation, the Court severed the protections of 35 U.S.C. § 3(c) as applied to APJs, which had restricted the removal of APJs only “for cause.” The Court held that, effective as of October 31, 2019, APJs could be removed “at will” and, with this modification to the statutory framework, the Court found that APJs would be considered inferior officers and the constitutional appointment problem would thus purportedly be remedied going forward. See, e.g., Charles R. Macedo, Federal Circuit Declares PTAB APJs To Be Superior Officers Appointed In An Unconstitutional Manner, But Offers A Fix Going Forward With Limited Relief Going Back, ARE PTAB Law Alert, available at https://www.arelaw.com/publications/view/alert11042019/.

As we reported in our prior ARE PTAB Law Alert on this case, a number of follow-on decisions were issued soon thereafter. These decisions feature varying twists on the Arthrex holding, including at least one panel decision questioning the scope and effectiveness of the remedy, and another panel decision asking for further briefing on the core questions raised by Arthrex.

On Monday, December 16, 2019, all three parties involved in the Arthrex matter submitted separate petitions for rehearing and/or rehearing en banc, with respect to the following questions:

• Arthrex, Inc. (Appellant and Patentee) – Combined Petition for Panel Rehearing & Rehearing En Banc

1. Whether Congress would have enacted the IPR statute, 35 U.S.C. § 311 et seq., creating quasi-judicial review of issued patents, without tenure protections for APJs necessary to ensure their independence and impartiality; and

2. Whether APJs remain principal officers under the Constitution even without tenure protections when they still have the power to issue Final Written Decisions absent meaningful review by an officer nominated by the President and confirmed by the Senate.

• Smith & Nephew, Inc. & ArthroCare Corp. (Appellees and Petitioners) – Petition for Rehearing En Banc

1. Whether Administrative Patent Judges are inferior or principal officers of the United States; and

2. If APJs are principal officers, what remedy is warranted for any defect in their appointment.

• United States (Intervenor) – Petition for Rehearing En Banc

1. Whether the administrative patent judges of the Patent Trial and Appeal Board are inferior officers of the United States under the Appointments Clause, U.S. CONST. art. II, § 2, cl. 2, such that Congress permissibly vested their appointments in a department head, rather than principal officers who must be nominated by the President and confirmed by the Senate;

2. Whether this Court should entertain an Appointments Clause challenge a litigant forfeited by failing to raise it before the agency; and

3. How to remedy any Appointments Clause defect in the Patent Trial and Appeal Board.

These three petitions, however, are not the only rehearing petitions that have been filed with respect to the Appointments Clause and APJs. For instance, in Uniloc 2017 LLC v. Facebook, Inc., No. 2018-2251 (Fed. Cir. Oct. 31, 2019), another panel vacated a PTAB decision and remanded the case for further proceedings based on Arthrex. Additionally, appellees Facebook, Inc. and WhatsApp, Inc. filed a combined petition for rehearing and rehearing en banc on Monday, December 2, 2019, presenting the following questions:

1. Whether the appointment of Administrative Patent Judges (APJs) to the Patent Trial and Appeal Board (PTAB) violates the Appointments Clause of the U.S. Constitution, U.S. CONST., Art 2, § 2, cl. 2, as the panel in Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019) concluded; and

2. If the answer to question (1) is “yes,” what appropriate judicial remedy, if any, can be fashioned to ameliorate the constitutional violation?

These questions show that there is significant disagreement as to the court’s decision in Arthrex. Other pending appeals from the PTAB have also been impacted by the Arthrex decision and are likely to result in further percolation at the Federal Circuit.

We will continue to monitor and report on developments in these matters. In the meantime, please feel free to contact us to learn more.

*Charles R. Macedo is a Partner and Chandler Sturm is a Law Clerk at Amster, Rothstein & Ebenstein LLP. Their practice specializes in intellectual property issues, including litigating patent, trademark and other intellectual property disputes. The authors may be reached at cmacedo@arelaw.com and csturm@arelaw.com.