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Who Watches the Watchmen? Supreme Court to Decide Fate of Administrative Patent Judge Appointments

March 8, 2021

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This case, which may have broad implications on post-grant proceeding process before the USPTO, is being watched by companies around the world.

Though once related to marital fidelity, the phrase Quis custodiet ipsos custodes?”―or as commonly translated, “Who watches the watchmen?”―from Juvenal’s Satires is now generally associated with the oversight of those in positions of power. To analogize to Juvenal, the Supreme Court of the United States is to decide the fate of administrative patent judges (APJs) of the Patent Trial and Appeal Board (PTAB), namely whether the current appointment scheme violates the Appointments Clause of the U.S. Constitution. This case, which may have broad implications on post-grant proceeding process before the USPTO, is being watched by companies around the world.

On March 1, 2021, the Supreme Court heard oral arguments in United States v. Arthrex, Inc., No. 19-1434 (argued Mar. 1, 2021) to decide the fate of the validity of appointments of APJs. At the PTAB, APJs preside in panels of three over post-grant trial proceedings created under the Leahy-Smith America Invents Act (AIA), namely inter partes reviews, post-grant reviews and derivation proceedings. At the onset of the AIA’s enactment, APJs were appointed by the Secretary of Commerce in consultation with the director of the USPTO. See 35 U.S.C. § 6(a) (2018).

However, in Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019), Arthrex, whose patents were invalidated in an inter partes review, successfully argued that the appointment of APJs violates the Appointments Clause because based on the work of APJs, APJs are not inferior officers appointed by a department head but principal officers who must be appointed by the president with the advice and consent of the Senate. See U.S. Const., art. II, § 2, cl. 2. In particular, the Federal Circuit determined that APJs are principal officers for two reasons:

  1. Lack of review of an APJ panel’s decision by another presidentially appointed officer; and
  2. Secretary of Commerce’s limited ability to remove APJs.

As a remedy, the Federal Circuit severed the removal provision of APJs under 5 U.S.C. § 7513(a) that limited removal “only for such cause as will promote the efficiency of the service” to render APJs inferior officers and vacated and remanded the decision to be reheard by a new panel of constitutionally appointed APJs.

The Supreme Court considered the questions of:

  1. Whether APJs are principal officers that must be appointed by the president with the advice and consent of the Senate or inferior officers who may be appointed by a department head; and
  2. Whether the Federal Circuit’s remedy of severing the removal provision from the appointment of APJs was sufficient to cure any Appointments Clause defect.

During oral argument, the United States, who intervened in the case to defend the AIA, asserted that the USPTO director has relatively broad powers that in addition to “promulgat[ing] binding guidance concerning substantive patent law,” “designat[ing] particular board opinions as precedential,” “decid[ing] whether any particular review will be instituted and which judges will sit on the panel,” and “de-institut[ing] a review even after it has been commenced” included the ability to instruct APJs on the matters of law, the director’s interpretation of the law and to comply with such instructions. See Transcript of Oral Argument at 5, 23-24, Arthrex, (argued Mar. 1, 2021) (No. 19-1434). These supervisory powers of the director thus sufficiently render APJs inferior officers.

Smith & Nephew argued that Arthrex misapplies one line of Edmond v. United States, 520 U.S. 651 (1997), which indicates military judges could not render a final decision unless permitted to do so by executive officers. Smith & Nephew clarified that the Court commented on the narrow scope of review at the United States Court of Appeals for the Armed Forces in that the judge advocate general could not provide advance guidance to military judges. In contrast, the USPTO director can “give substantive guidance to APJs,” and has “unilateral institution and assignment power,” and can “order review of any board decision.” See Transcript of Oral Argument at 28-29, Arthrex, (argued Mar. 1, 2021) (No. 19-1434). These powers of the director suggest that APJs are inferior officers.

Arthrex, in contrast, argued that the Federal Circuit’s remedy of severing the removal provision from the appointment of APJs was insufficient because APJs still have the final word on the cases they decide for the executive and the principal officer (USPTO director) is not accountable based on their inability to review board decisions. Thus, APJs are still principal officers and the Federal Circuit’s remedy is insufficient to cure the Appointments Clause defect. Congress, through legislation, should determine the proper remedy. In one example, Arthrex pointed to the Trademark Modernization Act, which gives the power to the USPTO director to reconsider, modify or set aside Trademark Trial and Appeal Board decisions.

Currently, more than 100 previous decisions under appeal at the Federal Circuit in which the patent owner raised an Appointments Clause challenge before the PTAB have been vacated and remanded by the Federal Circuit’s holding in Arthrex for rehearing before a new panel of APJs. See General Order In Cases Remanded Under Arthrex, Inc. v. Smith & Nephew Inc., 941 F.3d 1320 (Fed. Cir. 2019), (P.T.A.B. May 1, 2020). The PTAB ordered that other similar cases be held in abeyance pending the decision from the Supreme Court. See id.

The implications of the holding of Arthrex depend on how the Supreme Court rules on the questions considered. Should the Supreme Court find no Appointments Clause violation, the remands are likely to be vacated and the respective appeals would resume at the Federal Circuit. A holding affirming both the appointment of APJs violating the Appointments Clause and the Federal Circuit’s remedy of severing the removal provision to render APJs inferior officers would permit these rehearings to resume under the newly appointed panels. There would be no effect on currently pending and future cases before PTAB in these first two possible outcomes.

However, a decision where the Supreme Court affirms the finding of an Appointments Clause violation but disagrees with the Federal Circuit’s remedy would essentially stall post-grant proceedings before the USPTO until a remedy to address the proper appointment of APJs is put in place, which may require an act of Congress. The remedy may be as simple as providing the USPTO director with the authority to reconsider, modify or set aside PTAB decisions similar to the Trademark Modernization Act. At its most extreme, the post-grant proceeding process under the AIA could be dismantled for one that ensures the proper appointment of its adjudicators.

For More Information

If you have any questions about this Alert, please contact Thomas J. Kowalski, Deborah L. Lu, Ph.D., Heidi Lunasin, Brandon A. Chan, Ph.D., any of the attorneys in our Life Sciences and Medical Technologies Industry Group, any of the attorneys in our Intellectual Property Practice Group or the attorney in the firm with whom you in regular contact.

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