The Supreme Court granted certiorari to review the Arthrex v. Smith & Nephew Federal Circuit decision. The case presents two issues concerning whether Administrative Patent Judges of the Patent Trial and Appeal Board are constitutionally appointed:
- Whether Administrative Patent Judges (APJs) are principal officers or inferior officers for purposes of the Appointments Clause of the Constitution; and
- If APJs are principle officers, whether any Appointment Clause defect was cured when the Federal Circuit severed application of Title 5’s removal protections to APJs.
This post presents a primer on the underlying Arthrex case and provides some brief commentary to explain the issues presented to the Court.
Arthrex at the Federal Circuit
The Arthrex case arises out of a final written decision finding Arthrex’s claims anticipated and invalid. Arthrex appealed the decision to the Federal Circuit arguing that the APJs authoring the decision were not constitutionally appointed, and therefore, the decision is invalid. The United States intervened in the suit, arguing that the appointment of APJs was constitutional.
The Federal Circuit ultimately found that APJs were unconstitutionally appointed. The Federal Circuit found that APJs are principal officers that must be appointed by the President and confirmed by the Senate. However, APJs are in fact appointed by the Secretary of Commerce in consultation with the Director of the USPTO. The Federal Circuit purported to cure the constitutional defect by severing certain employment protections that prevented the Director from firing APJs without cause.
As a result of the Federal Circuit decision, many PTAB cases were remanded to be re-decided by constitutionally appointed APJs. The sheer number of remanded cases prompted the Chief Administrative Patent Judge to hold in abeyance all matters remanded under Arthrex until the Supreme Court acts on a petition for certiorari, or until time for filing the petition expires. The United States and Smith & Nephew both filed petitions for certiorari to the Supreme Court.
The Supreme Court has granted the petition for certiorari, taking up two issues for review. The granted petition lays out the two issues as follows:
1. Whether, for purposes of the Appointments Clause, U.S. Const. Art. II, § 2, Cl. 2, administrative patent judges of the U.S. Patent and Trademark Office are principal officers who must be appointed by the President with the Senate’s advice and consent, or “inferior Officers” whose appointment Congress has permissibly vested in a department head.
2. Whether, if administrative patent judges are principal officers, the court of appeals properly cured any Appointments Clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. 7513(a) to those judges.
The Court declined to take up the third question recited in the same petition:
3. Whether the court of appeals in Arthrex erred by adjudicating an Appointments Clause challenge that had not been presented to the agency.
Principle vs Inferior Officers
At the Federal Circuit, both parties acknowledged that APJ’s are officers of the United States — someone who exercises significant authority pursuant to the laws of the United States. Thus, the first question turns on whether APJs are principal or inferior officers for the purposes of the Appointments Clause. The Appointments Clause distinguishes between officers that must be appointed by the President and inferior officers which Congress may permit to be appointed by department heads:
[The President] shall appoint ambassadors, other public ministers and consuls, judges of the Supreme Court, and 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.
U.S. Const., art. II, § 2, cl. 2. (emphasis added).
The Federal Circuit determined that APJs are principal officers in Arthrex. In making this determination, the Federal Circuit looked to the three Edmond factors set forth by the Supreme Court, including:
(1) Review Power – whether an appointed official has the power to review and reverse the officers’ decision;
(2) Supervision Power – the level of supervision and oversight an appointed official has over the officers; and
First, the Federal Circuit found that Review Power weighs in favor of finding APJs to be principal officers. The court noted that no presidentially appointed officer has independent authority to review a final written decision by the APJs before it issues on behalf of the United States. Indeed, the Director is the only member of the Board who is nominated by the President and confirmed by the Senate, and there is no provision or procedure providing the Director the power to single-handedly review, nullify or reverse a final written decision issued by a panel of APJs.
Second, the Federal Circuit found that Supervision Power weighed in favor of finding APJs to be inferior officers. The court noted that the Director exercises a broad policy-direction and supervisory authority over the APJs. Specifically, the Director has the authority to promulgate regulations governing the conduct of inter partes review; has the power to issue policy directives and management supervision of the Office; may provide instructions that include exemplary applications of patent laws to fact patterns; and no decision of the Board can be designated or de-designated as precedential (and therefore binding on future panels) without the Director’s approval.
Third, the Federal Circuit found that Removal Power weigh in favor of finding APJs to be principal officers. The Federal Circuit noted that the Director and the Secretary lacked unfettered removal authority over APJs — rather, any removal authority the Director or Secretary have over APJs is subject to limitations by 5 U.S.C. § 7513. Specifically, APJs may be removed “only for such cause as will promote the efficiency of the service,” requiring “a nexus between the misconduct and the work of the agency, i.e., that the employee’s misconduct is likely to have an adverse impact on the agency’s performance of its functions.” Further, § 7513 provided additional protections to APJs, entitling them to 30 days advanced written notice stating specific reasons for the removal, an opportunity to respond with documentary evidence, and representation by an attorney.
Finally, noting the above factors are not exhaustive, the court expressed the absence of other factors supporting a conclusion that APJs are inferior officers. Indeed, the court went on to note that prior to 1975, “’Examiners-in-Chief’—the former title of the current APJs—were subject to nomination by the President and confirmation by the Senate,” and opined that APJs currently wield more authority than their Examiner-in-Chief predecessors.
In view of the foregoing the Federal Circuit found APJs to be principal officers. The Federal Circuit drew a parallel between the APJs of this suit and the Copyright Royalty Judges (CRJs) found to be principal officers by the DC Circuit in Intercollegiate. Specifically, the CRJs of Intercollegiate issued unreviewable ratemaking decisions that set the terms of exchange for musical works and could be removed by the Librarian of Congress “for misconduct or neglect of duty.” The Federal Circuit analogized that APJs issue final decisions with limited review power and cannot be removed for cause, and likewise found them to be principal officers in violation of the Appointments Clause.
Appointment Clause Cure
The Federal Circuit purported to cure the constitutional defect by severing the applicability of 5 U.S.C. § 7513 to APJs. The court noted that the DC Circuit followed the same approach in Intercollegiate by severing the restriction of the Librarian’s removal power over the CRJs. Accordingly, finding that § 7513’s employment protections cannot constitutionally be extended to APJs, the Federal Circuit severed applicability of this statute to APJs. In the Federal Circuits view, this severance effectively transformed the APJs into inferior officers that need not be appointed by the President and confirmed by the Senate, but could be duly appointed by the head of a department such as the Director of the USPTO. Nevertheless, because the underlying final written decision in Arthrex had been issued by a panel of APJs now found to have been unconstitutionally appointed, the court vacated and remanded the decision back to the Board for a new hearing before a constitutionally appointed panel.
While the underlying constitutional issues are significant, it is unclear how much lasting impact the Supreme Court’s decision in this case may have. For example, assuming that the APJs are principal officers, and further assuming that a constitutional defect remains, it is highly unlikely that the Supreme Court would bring an end to post-grant proceedings with its decision in this case. Rather, assuming a constitutional defect remains, it is probable that congress would draft a legislative fix, potentially dampening the significance of the Court’s determination. Indeed, Congress has previously considered whether the Federal Circuit’s solution was effective and the House Judiciary Committee has discussed implementing a legislative solution as early as November of 2019. Accordingly, while a decision in this case may lead to improved clarity in the law, the lasting practical effects of the Supreme Court’s decision in this case may be muted.
M.P.E.P. § 1202 Composition of the Board — “The administrative patent judges shall be persons of competent legal knowledge and scientific ability who are appointed by the Secretary, in consultation with the Director.”
About the Author
Scott is an intellectual property lawyer and registered patent attorney with years of experience helping inventors and companies protect their innovations. Scott’s practice focuses on patent prosecution and post-grant proceedings before the Patent Trial and Appeal Board. Prior to Eastgate IP, Scott practiced intellectual property law at Knobbe Martens.