by Dennis Crouch
United States v. Arthrex, — S.Ct. — (2021)
The Supreme Court has confirmed that PTAB Judges yield unreviewable authority during inter partes review and therefore acting as Principal Officers under the US Constitution. Therefore the APJs should have been nominated by the President and confirmed by the Senate.
BUT, the Court solved the problem in a new way–by making PTAB determinations reviewable by the USPTO Director. This leaves the PTAB system in-place, but will place major insider political pressure on the PTO Director (and current Acting Director).
= = = =
One irony here is that the person with new political accountability is Drew Hirshfeld. Although he is sitting in the Director’s seat, Hirshfeld was not appointed as PTO Director by anyone. Although the Supreme Court refers to him as “Acting Director,” the administration has taken pains to clearly state that he is not the acting director. Rather, Hirshfeld’s title is a person “Performing the functions and duties of the Under Secretary of Commerce for Intellectual Property and Director of the USPTO.”
= = =
Chief Justice Roberts wrote the Majority Opinion.
- Parts I and II Concludes that APJs were acting as Principal Officers. This portion was joined by Justices Alito, Gorsuch, Kavanaugh, and Barrett. (5 Justices)
- Part III provides a judicial remedy by rewriting the statute to give the USPTO Director power to directly review PTAB decisions. That portion was only joined by Justices Alito, Kavanaugh, and Barrett. (only 4 Justices). However, Justice Breyer, Sotomayor and Kagan agreed in a separate opinion that the remedy was proper (although they disagreed about whether it was needed at all).
Justice Gorsuch disagreed with the remedy — He would have simply set-aside the PTAB decisions and let Congress fix the problem.
Justice Thomas dissented from the whole majority approach – finding that Congress expressly identified APJs as inferior officers and that they are two steps below the president (i.e., pretty far down on the chain). “For the very first time, this Court holds that Congress violated the Constitution by vesting the appointment of a federal officer in the head of a department.” In addition, Justice Thomas argued that the remedy is inappropriate: “If the Court truly believed administrative patent judges are principal officers, then the Court would need to vacate the Board’s decision.”
= = =
It is telling that Chief Justice Roberts opinion does not begin with a discussion of “rights” but rather Congressional intent to create “a workable patent system.” Here, the court attempts to keep the train on the tracks, but does create real potential trouble by placing the USPTO Director in the political cross-hairs.
This case focuses on Inter Partes Revew proceedings that are decided by the Patent Trial and Appeal Board (PTAB) whose Administrative Patent Judges (APJs) are appointed by the Secretary of Commerce. This setup though has a Constitutional problem because APJs issue opinions on behalf of the U.S. Government in cases involving private property interests potentially worth billions of dollars. An individual with that power is an Officer of the United States and must generally be appointed by the US President and Confirmed by the Senate, just like is done with Federal Judges and heads of office. We obviously have some big due process problems when improperly appointed judges issue opinions deciding rights.
Regarding the Appointments Clause, Hamilton wrote that the President should appoint the officers so that the President can be held directly accountable for the good and the bad. “[S]ole and undivided responsibility of one man will naturally beget a livelier sense of duty and a more exact regard to reputation.” The Federalist No. 77.
In its opinion, the Federal Circuit found that APJ’s were improperly appointed, but then issued a savings-severance. The appellate court invalidated the tenure protections for APJs guaranteed by statute and concluded that was enough to reduce APJs to inferior officers who did not need presidential appointment. On reflection, the Supreme Court wrote “This satisfied no one.”
Edmond v. United States, 520 U. S. 651 (1997), is Supreme Court’s key case-on-point regarding principal-officer vs inferior-officer vs no-officer-at-all. Here, the court applied Edmond – finding that the PTO Director has substantial authority over APJs – finding that “he is the boss” in most ways. BUT, there is one big exception, the PTAB director does not have authority to review the actual APJ decisions.
He is the boss, except when it comes to the one thing that makes the APJs officers exercising “significant authority” in the first place—their power to issue decisions on patentability.
Slip Op. The Appointments Clause requires politically accountable individuals be responsible in a way that leads directly to the President, and the current setup does not allow for that result. “[T]he public can only wonder ‘on whom the blame or the punishment of a pernicious measure, or series of pernicious measures ought really to fall.'” Slip Op., quoting The Federalist No. 70. The court also looked to the history of the U.S. Patent System:
When it comes to the patent system in particular, adjudication has followed the traditional rule that a principal officer, if not the President himself, makes the final decision on how to exercise executive power. Recall that officers in President Washington’s Cabinet formed the first Patent Board in 1790. 1 Stat. 109–110. The initial determination of patentability was then relegated to the courts in 1793, but when the Executive Branch reassumed authority in 1836, it was the Commissioner of Patents appointed by the President with the advice and consent of the Senate—who exercised control over the issuance of a patent. The patent system, for nearly the next hundred years, remained accountable to the President through the Commissioner, who directed the work of his subordinates by, for example, hearing appeals from decisions by examiners-in-chief, the forebears of today’s APJs.
Slip Op. All of this leads to the conclusion that APJs are acting like principal officers:
We hold that the unreviewable authority wielded by APJs during inter partes review is incompatible with their appointment by the Secretary to an inferior office.
Note here that the court does not exactly state that “APJs are principal officers” but only that they are acting as such when deciding IPRs. Regardless, it is improper for them to act-as-such because they are not principal officers.
For a solution, the court rejecting the Federal Circuit’s approach because it does not solve the unreviewability problem. The Supreme Court offers its own solution: “Decisions by APJs must be subject to review by the Director.” Here is what the court tells us: Once the PTAB makes its decision, the PTO Director then has the power to review the case and “reach his own decision.” The PTO director’s decision is then reviewable in court.
When reviewing such a decision by the Director, a court must decide the case “conformably to the constitution, disregarding the law” placing restrictions on his review authority in violation of Article II. Marbury v. Madison, 1 Cranch 137, 178 (1803).
Slip Op. The Supreme Court also makes clear that its decision only directly applies to IPR proceedings. “We do not address the Director’s supervision over other types of adjudications conducted by the PTAB, such as the examination process for which the Director has claimed unilateral authority to issue a patent.”
On remand, the Supreme Court is not requiring the PTAB to rehear any of the prior decisions. But, the PTO Director will need to issue decisions in each case indicating whether or not the office will be rehearing the case.
In deciding the cases, the PTO Director should be careful to avoid calling it a rehearing since “Only the Patent Trial and Appeal Board may grant rehearings.” 35 U.S.C. 6.
= = = =
Big questions for the patent system going forward: how does this Director-Review work and how much political lobbying is appropriate?
= = = =
I noted above that Part III – the remedy portion – of Chief Justice Robert’s opinion only garnered four votes. Not a majority. However, Justice Breyer wrote a separate opinion joined by two others that “agree with its remedial holding.” I have not parsed through how this statement differs from simply joining Part III.
= = = = =
The court notes and the Thompson v. Haight decision from Judge Van Ness that I quoted a couple of weeks ago:
Judge William Van Ness—who before taking the bench had served as second to Aaron Burr in his duel with Alexander Hamilton—lamented that Congress had left the door “open and unguarded” for imposters to secure patents, with the consequences of “litigation and endless trouble, if not total ruin, to the true inventor.” Thompson v. Haight, 23 F. Cas. 1040, 1041–1042 (No. 13,957) (CC SDNY 1826). Congress heeded such concerns by returning the initial determination of patentability to the Executive Branch, see 5 Stat. 117–118, where it remains today.
= = = = =
One interesting bit I saw in the opinion was the note that the Court of Customs and Patent Appeals (CCPA) was “an entity within the Executive branch until 1958.” In Ex parte Bakelite Corp., 279 U. S. 438 (1929), the Supreme Court called the CCPA a “legislative court and not a constitutional court.” As such, there was no standing requirement under Article III of the Constitution. “Even if the proceeding is not such a case or controversy, the Court of Customs Appeals, being a legislative court, may be invested with jurisdiction of it.” In 1958, Congress overturned that decision with a statement that the CCPA “is hereby declared to be a court established under article III of the Constitution
of the United States.” 72 Stat. 848.