The en banc US Court of Appeals for the Federal Circuit declined to review its October 2019 panel decision holding the appointment of administrative patent judges (APJs) at the US Patent and Trademark Office (PTO) unconstitutional because APJs are appointed as if they are “inferior officers” but vested with authority that is reserved for Senate-confirmed “principal officers” under the Constitution’s Appointments Clause. Arthrex, Inc. v. Smith & Nephew, Inc., Case No. 18-2140 (Fed. Cir. Mar. 23, 2020) (per curiam) (Moore, J., joined by O’Malley, Reyna and Chen, JJ., concurring) (Dyk, J., joined by Newman, Wallach and Hughes, JJ., dissenting).
In its panel decision, the Federal Circuit judicially severed a portion of the America Invents Act (AIA), codified in 35 USC § 3(c), that affords APJs with job security benefits under 5 USC § 7513(a) by limiting their removal from office “only for such cause as will promote the efficiency of the service” (IP Update, Vol. 22, No. 11). According to the Court, striking down APJs’ Title 5 protections under the AIA gave the PTO director the necessary authority and oversight for the Patent Trial and Appeal Board (PTAB) and its APJs to survive the constitutional challenge, permitting the PTO director to fire APJs at will and without cause. The Court further held that a new panel of APJs must be designated to hear the Arthrex inter partes review anew on remand. However, the Court restricted its holding by limiting its impact “to those cases where final written decisions were issued and where litigants present an Appointments Clause challenge on appeal.” The parties filed petitions for rehearing en banc.
Concurrence (Moore, O’Malley, Reyna and Chen)
The concurrence defended the prior panel analysis regarding judicially severing the constitutionally offensive portion of APJ appointments while preserving the remainder of the AIA, including the inter partes review system. The concurrence explained that making APJs removable at will and without cause, and remanding for a new hearing, were the least disruptive ways to “fix” the Appointments Clause violations. The concurrence added that Congress can choose to “reinstate [T]itle 5 removal protections for APJs while ensuring that the inter partes review system complies with the Appointments Clause.”
The concurrence also criticized the dissent for overstepping judicial restraint in attempting to issue legislative or regulatory mandates regarding how PTAB oversight ought to be structured, and for suggesting (under Dyk’s framework) that application of Title 5’s removal protections from the remainder of the AIA would retroactively render all prior APJ decisions constitutional, thereby obviating the need for panel rehearings in any cases decided under the AIA.
Dissents (Dyk, Newman, Wallach and Hughes)
Judges Wallach and Hughes issued separate dissents explaining that APJs should be deemed inferior officers, not principal officers, because the PTO director has sufficient oversight of the PTAB. Examples of such oversight include the PTO director’s broad authority to direct and supervise APJs, promulgate regulations including those that govern inter partes review, establish PTO policy, select APJ panel members, designate which panel decisions are precedential and select the APJ members of the Precedential Opinion Panel.
Judge Dyk (joined by Judges Newman, Wallach and Hughes in part) also pointed out that the “draconian” remedy of stripping APJs of their Title 5 removal protections “rewrites the statute contrary to Congressional intent,” depriving the PTO of the opportunity to devise a less disruptive remedy. Judge Dyk added that even if the Title 5 remedy was adopted, it would not require invalidation of preexisting PTAB decisions. Judge Dyk suggested that the PTO could form a special executive rehearing panel consisting of members already appointed by the president or essentially removable at will by the secretary of commerce, i.e., a panel composed of members that would comply with the Appointments Clause. Such a rehearing panel could consist of the PTO director, PTO deputy director and the commissioner of patents.
Under his proposed judicial construction, Judge Dyk also pointed out that there would be no need for a remand before a new APJ panel, because APJs would have been properly appointed by the secretary of commerce, and their prior decisions would not be rendered invalid. Judge Dyk commented that the original panel decision “improperly declined to make its ruling retroactive” in order to make the actions of APJs in the past compliant with the constitution and the statute. Thus, “the past opinions rendered by the PTAB should be reviewed on the merits, not vacated for a new hearing before a different panel.”
Practice Note: The en banc decision will likely be appealed to the Supreme Court of the United States for further clarification. For now, the PTAB and inter partes review system remain intact. The Federal Circuit has refused to stay the decision pending certiorari.