Appointments and Illegal Adjudication: A Second Patent Judge Appointments Crisis

In 2007, Prof. John Duffy penned a Patently-O essay explaining that Administrative Patent Judges are at least “inferior officers” under the US Constitution (art. II, § 2, cl. 2) — requiring appointment by a Head of Department (i.e., Secretary of Commerce).   Duffy’s work on the topic prompted statutory reform and now all PTAB follow that appointment process.

In a new article, Prof. Gary Lawson takes Duffy’s analysis a major step forward – explaining that the PTAB is special because its Inter Partes Review actions are not further reviewed by any executive actor — rendering Administrative Patent Judges principal officer (rather than inferior) and requiring appointment by the President with Advice and Consent of the Senate.

Lawson, Gary, Appointments and Illegal Adjudication: The AIA Through a Constitutional Lens (January 12, 2018). George Mason Law Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3105511.

The key precedent on point is likely Edmond v. United States where Justice Scalia explained:

Generally speaking, the term “inferior officer” connotes a relationship with some higher ranking officer or officers below the President: Whether one is an “inferior” officer depends on whether he has a superior. It is not enough that other officers may be identified who formally maintain a higher rank, or possess responsibilities of a greater magnitude. If that were the intention, the Constitution might have used the phrase “lesser officer.” Rather, in the context of a Clause designed to preserve political  accountability relative to important Government assignments, we think it evident that “inferior officers” are officers whose work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.

Based upon this analysis, Lawson then concludes that PTAB judges must be principal offices since they have “final decisional authority.”

The so-called “Duffy Defect” was somewhat easy to solve – although it did require a one-time change in statute and then re-appointments by the Director of Commerce.  Actually having the Senate confer on each PTAB judge seems like a much larger matter.  In his draft article, Lawson suggests (with some jest) his find be identified as the “Lawson Lacuna.” My ideas: “Lawson End Run”; “Lawson Appointments Gun”; or “Yes, the Law applies to you Son”

Pushing back: Although PTAB decisions are “final” there are a few factors that  might remove the judges from Lawson’s Principal Status. For example:

  • Because the PTAB judges act as members of a three-member tribunal, their personal administrative authority is substantially reduced.   No individual PTAB judge has “final decisional authority” but rather only a minority vote.
  • Although oversight is not ordinarily done on a case-by-case basis, there is substantial oversight and direction given to PTAB judges.
  • Each decision is subject to review, including consideration by an expanded panel at the behest of the PTO director that capable of overturning the prior decision (Although some PTO officials has denied that this happens).

Although I believe these factors are relevant and weaken Lawson’s argument somewhat, it is unclear at this point the extent that they are sufficient to fully undermine his conclusion.

 

37 thoughts on “Appointments and Illegal Adjudication: A Second Patent Judge Appointments Crisis

  1. 8

    The without standing is just huge in IPRs. Imagine if anyone could contest the ownership of your house and you would have to go out and hire an attorney for $200K to defend your house. And no consequences for the person that sued you. And as many people as want can sue you.

    1. 8.1

      An apt analogy indeed, Night Writer, as it is the essence of property that is very much at stake here.

      On another thread I pointed out to AAA JJ (who would rather have his knickers in a twist) how basic principles of law are involved that constrain even the correct branch that has been allocated authority to write the statutory law that is patent law from writing any subsequent law that violates other Constitutional protections for an item that has once inured – as a right – something that the Constitution provides a panoply of protections for.

      Congress DOES misstep. That should not be a surprise. The Court – in its proper role – is there to roll back such missteps.

  2. 7

    Oil States is yet to be decided, but the dissent in Stern v. Marshall ( the four libs still on the court) argued the degree of political control of the administrative judge was a strong factor in determining whether there was a constitutional violation of the separation of powers. Permitting the director to overrule the PTAB would seem to be heading in the wrong direction.

    Regardless of the outcome of Oil States, a simple solution for the PTAB would be to treat them as adjuncts of the courts — appointed by the Courts, just like bankruptcy judges. This would solve most of the Oil States problem, perhaps all of it given de novo review by a district court.

    1. 7.1

      Simple solution…?

      And how would you achieve the Ends that you seek? By what Means?

      You do realize that you would need to overhaul – that is, redo completely – the law as written by Congress in order to reach your Ends, eh?

      Also, what would you do with the Congress-provided LACK of standing in the NON-Article III forum? If you make this merely “an adjunct,” what do you do with standing?

      As my friends in Boston say: “you can’t get there from here”

      1. 7.1.1

        anon, do you really think that a party without standing has a right to toss a private party into forum where his property is subject to being taken/revoked?

        That is not a feature, it is another constitutional defect.

        1. 7.1.1.1

          I am not arguing the nature of the defect, just noting that the item of NOT requiring standing IS the law – and is a conscience decision of Congress.

          Any “easy” Ends by you needs to address this.

          1. 7.1.1.1.1

            anon, but the choice is unconstitutional. There is a reason why we have standing requirements.

            1. 7.1.1.1.1.1

              Yet again Ned – your Ends have to adjust. You want something explicitly different than what Congress set out.

              You cannot get to your Ends without dealing with that small factoid.

              So what is your answer to making the IPR scheme a “mere adjunct” and dealing with the “no standing” fact?

              Are you just going to ignore it? Hope it goes away? Change the mind of Congress?

      2. 7.1.2

        If I understand correctly, the bankruptcy court constitutionality issue pertained to a small cutout of statutory authority while the PTAB problem pertains to the whole authority granted to the PTAB.

        [I did not research Stern v. Marshal. I just read Supreme Court Declares Bankruptcy Courts’ Jurisdiction to Decide Counterclaims Based on State Common Law Unconstitutional.]

        When I look at the statutes for PGR (POST-GRANT REVIEW (§§ 321 to 329)) and IPR (INTER PARTES REVIEW (§§ 311 to 319)), they lack a lot of detail and seem to leave much to substantive rulemaking by the USPTO.

        The USPTO is only allowed to engage in procedural rulemaking.

        Could PGR and IPR be “fixed” possibly by simply changing the rules?

        If “fixing” requires substantive rulemaking, which governmental entity would make the rules?

        1. 7.1.2.1

          The USPTO is only allowed to engage in procedural rulemaking.

          That is NOT a correct statement for the issues at hand (AIA-related).

          Congress did provide limited substantive rule-making power in the AIA.

          It is (very much) a different question as to the propriety of Congress doing so, but there is NO question that they indeed did do so.

          1. 7.1.2.1.1

            Okay, then I just find this limited substantive rule-making power to be confusing.

            I think you are telling me that

            35 U.S. Code § 316 – Conduct of inter partes review – and

            35 U.S. Code § 326 – Conduct of post-grant review –

            confer limited substantive rule-making power.

            Here is § 316 (e).

            (e)Evidentiary Standards.—
            In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.

            Here is § 326 (e).

            (e)Evidentiary Standards.—
            In a post-grant review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.

            I tried to put in the image above what Inter Partes, Post Grant, and Covered Business Method Review Final Rules (77 Fed. Reg. 48680, August 14, 2012) states on p. 48697.

            [Sorry. You may have to go to the web page if the image above is not legible.]

            As I understand examination, examination uses BRI in claim construction because there is no presumption of patentability.

            Yet in PGR and IPR “the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.”

            Doesn’t it seem to you that not only is the USPTO claiming more than limited substantive rule-making authority but is, in fact, claiming rule-making authority to overrule the two relevant statutes, to wit, §§ 316 & 326?

            1. 7.1.2.1.1.1

              The relevant passage is: 35 USC § 326

              It is most definitely NOT limited to 35 USC § 326(e), (look at (a)(4), as well as (b)).

              1. 7.1.2.1.1.1.1

                I think I understand 35 USC §§ 316 & 326 (a) – (d), but I am not sure it is possible to use BRI in claim construction without giving the patent owner the burden of proving a proposition of patentability by an evidentiary standard that is much stricter than a preponderance of the evidence.

                Careful reading of the cases, in which the CAFC slaps the PTAB for applying Broadest Unreasonable Interpretation, tells us that an applicant must prove patentability by a clear and convincing evidentiary standard in order to overcome an unpatentability presumption that claim construction by BRI creates.

                In other words, I understand that 35 USC §§ 316 & 326 (e) require the petitioner to jump over an extremely low bar to prove unpatentability, but IPR or PGR claim construction via BRI inherently forces the patent owner to prove patentability by clear and convincing evidence or perhaps even beyond a shadow of a doubt.

                The PTAB applied the “shadow of a doubt” standard (or higher standard) to proving patentability in PGR2015-00018, which is the first Bunch-O-Balloons PGR. I discuss the standard applied in USPTO’s New Motto: “You Innovate – We Expropriate!” — unfortunately along with a lot of other stuff.

                The two critical sections are short.

                Here is the first section.

                USPTO War on the English Language

                The PTAB is able seriously to spew nonsense about the use of the word “substantially” in the phrase “substantially filled” because grammar including parsing is no longer part of American elementary education. The use of “substantially” as a semantic attribute or semantic selector for one meaning range of “fill” and paronyms is a somewhat technical issue from the standpoint of formal grammar, but a real POSA, who is described in detail in “How Do I Hate Post Grant Review? Let Me Count the Ways,” or a member of the public, who has ever substantially filled a coffee cup, the motor oil reservoir of a car, or a gas tank, understands the phrase “substantially filled” and can’t help but find the metes and bounds of the claims using the phrase “substantially filled” to be clearly demarcated and completely definite.

                Here is the second section.

                Technological Arts, Crafts, and Sciences

                The following limitation is more than adequate for a POSA.

                “a plurality of elastic fasteners, each elastic fastener clamping a respective one of the plurality of containers to a corresponding hollow tube, and each elastic fastener configured to provide a connecting force that is not less than a weight of one of the containers when substantially filled with water, and to automatically seal its respective one of the plurality of containers upon detaching the container from its corresponding hollow tube, such that shaking the hollow tubes in a state in which the containers are substantially filled with water overcomes the connecting force and causes the containers to detach from the hollow tubes thereby causing the elastic fasteners to automatically seal the containers…”

                It tells a POSA the invention uses static friction within the range of force that manual shaking can generate. The invention is rather clever. Because friction is not a fundamental force, one could add a lot of discussion about asperities to the written description, but it is hard to view such description as clear or helpful to a POSA or to the public either for teaching the invention or for specifying the metes and bounds encompassing the invention. Because one could practice the Bunch-O-Balloons invention with a number of different materials, some materials science mathematics specific to one or two sets of materials would not really add anything to written description except perhaps for the interested materials scientist.

                In the case of the phrase “substantially filled,” because the PTAB seems to assert that a feature of the English language is inherently indefinite, the PTAB has given the patent owner an impossible evidentiary standard for proving patentability.

                In the case of the excerpt “such that shaking the hollow tubes in a state in which the containers are substantially filled with water overcomes the connecting force and causes the containers to detach,” the PTAB is requiring the patent owner to prove patentability at least by a clear and convincing evidentiary standard.

                I am forced to conclude that the USPTO choice of claim construction by means of BRI is tantamount to overriding 35 USC §§ 316 & 326 (e).

                1. Joachim,

                  In your hurry to get to your (different) point, you leap over the more important point here:

                  The administrative agency WAS provided substantive rule-making power in the AIA.

                  We can get to your “other” crusade at any time – let’s think about the larger picture for a moment (and recognize from the administrative law angle what a large mistake by Congress this was, especially given the number of factors that come into play with the particular administrative agency of the USPTO, with its KNOWN low (one of the lowest) separations between judicial and [executive] policy controls, its past power grabs (re: Tafas), and its full blown disregard for 37 CFR 1.2 and the sheer number of SAWS-like programs that no one even can put a number on (because they remain in the shadows). Yes, each of these points can be reflected in your rather well developed “other” point, but let’s not lose view of the fact that each of these are symptoms to a larger problem.

                2. The one does not follow the other as you are suggesting.

                  I “get” that it seems that way.

                  But that is MORE a case of a rouge PTAB than it is a case of the structure to which you want to posit (evidentiary standard induced by BRI).

                  Actually, you have more fundamental problems with the application of BRI and the – as written – lack of an unfettered affirmative right to amend. The reasoning behind BRI in the first place simply does not exist in the situation of post grant review.

                  This too is a reflection of needing to ask the right questions.

                  You see, the application of BRI is being passed off as a natural attribute of the “issue” having been returned to the forum of the administrative agency of the Patent Office. Critical thinking is being stopped BECAUSE post grant review is being conducted within the administrative agency, and BRI (of course) is what THE AGENCY uses.

                  The ability TO use BRI goes hand in hand with the taking a stick out of the bundle of property rights that occurs at the initiation decision point. That stick (of course) is the presumption (and level of that presumption) of validity.

                  REGARDLESS of any later decision on the merits, it is a taking at the initiation decision point that provides the path that the Office uses to USE THE GRANTED POWER (as limited as that power may be) to make the substantive rule of using BRI.

                  Pointing at PTAB and “saying foul” is NOT asking the right question.

                  One needs to point at Congress and “say foul” to the lack of protection of OTHER Constitutional protections that inure to the item of property when – at the moment of grant – an inchoate right is turned into a FULL legal right of property (and at THAT moment obtaining protections that Congress may not ignore with a subsequent addition of law in the AIA).

    2. 7.2

      If there was dist. ct. appeal or route, then the whole IPR would become fairly useless.

  3. 6

    The fact that the director can claim all decisions are reviewed means this is nonsense.

    What about a clerk that decides on whether your application for a driver’s license is complete?

    Sorry Charlie not going to fly.

  4. 5

    Seems like the issue of a lack of “final” review by a properly appointed officer would also apply to appeals of PTAB decisions in ex parte examinations under Section 141(a), unless there is some saving aspect of the ability to invoke a district court action under Section 145 from those PTAB decisions.

    Same “fix” of 30 days for Director to review could address all of these issues.

    1. 5.1

      Until the 1970’s, members of the PTO’s Board of Appeals were appointed by the President. A. Lincoln appointed the first Examiner-in-Chief.

      Although the focus here is on post-grant reviews (e.g., IPRs), I agree that Professor Lawson’s (second) section concerning violation of the Appointments Clause is not dependent on any property interest attendant to an issued patent. The analysis concludes that the power of “final decisional authority within the executive department” determines whether one must be appointed by the President. The analysis applies equally to the final agency decisions by the Board of Patent Appeals and Interferences (1985-2012) and the current PTAB decisions denying grant of a patent (i.e., in ex parte appeals from examiners’ adverse decisions during patent prosecution). In other words, every decision of the PTAB that is ripe for Article III review is implicated.

      1. 5.1.1

        I will have to reread the article, but it seems to make a distinction between allowance and cancellation in that the Commissioner/Director is not bound by the PTAB’s decision in the case of allowability while cancellation in a post-grant review proceeding takes effect as soon as the appeal period runs out.

        In the examination case, the PTAB just acts as the highest order of examiner. If the PTAB does not reverse a rejection, the claim remains a pending claim that is not allowed. Even if the PTAB does reverse a rejection, the claim may remain pending because the TC director can reopen examination.

        In the post-grant review case, the previously valid claim becomes canceled.

        The latter case seems to require review by a superior officer while the former seems not to have such a requirement, but I read the article extremely rapidly and have not fully assimilated it yet.

  5. 4

    I wonder whether the same defect would also apply to the judges on the Trademark Trial and Appeal Board. There do not appear to be any distinguishing factors.

    1. 4.1

      Probably the dispositive fact is that the applicant can appeal.

  6. 3

    The Supremes just granted review for this term in a case raising a similar issue whose impact might carry over directly: Lucia v. SEC.

    link to scotusblog.com

    Prof. Lawson has one footnote citing the divided lower court decision. Perhaps the grant of cert in Lucia justifies an update?

  7. 2

    Does Professors Larsen and Duffy’s analysis also apply to patent examiners? Examiners can issue a Notice of Allowance or Final Rejection as a final agency action. Do examiners need to be confirmed by the Senate, and if so, is every Notice of Allowance and Final Rejection now illegal?

    1. 2.1

      Except (as may prove the case), each such “final action” by the examiner is then processed and guess whose signature actually provides that final push into making the inchoate right into an actual property right (as such as that may be)….

    2. 2.2

      A so-called “final rejection” is not a final agency action. There is a right of appeal from a “final rejection,” so there is still plenty of opportunity for the agency to chance its mind after a final rejection. It is not a “final agency action” until the PTAB sustains the examiner’s rejection.

      I am not really sure that a notice of allowance can actually be called a final agency action, either. The notice of allowance can be revoked, and it requires additional actions before the agency is well and truly done with the application.

      In other words, it does not appear that examiners really can take any actions that would qualify as “final agency actions” (as that term is understood in the administrative law context), so there is no reason why examiners ought to require appointment and senate approval.

    3. 2.3

      “Notice of Allowance or Final Rejection as a final agency action.”

      Neither of those is a final agency action.

  8. 1

    Prof. Gary Larsen takes Duffy’s analysis a major step forward – explaining that the PTAB is special because its Inter Partes Review actions are not further reviewed by any executive actor

    Seems like an easy “fix” that is pretty much suggesting itself.

    1. 1.1

      True – I think we would have a total fix here if PTO director was given 30 days to reject a PTAB decision.

      1. 1.1.1

        My wife loves crime shows, and one recurring theme is that a “rogue” actor (perhaps a District Attorney, or a judge) is revealed to have improperly handled cases, and a whole boatload (basically every case handled by the rogue party) is then cast into doubt and each may be thrown out.

        Would such apply to every IPR proceeding?

      2. 1.1.2

        We need another fix in the second paragraph of the story. Gary Larsen was a football player (and Gary Larson was a cartoonist).

      3. 1.1.3

        Yeah but then they might have to at least briefly glance over all the decisions. At least in order for it to be a meaningful “oversight/supervision”.

        1. 1.1.3.1

          Do they have to understand the decisions or can they just pretend that they do, kind of like Mango Hairb@ll pretends that he knows what he’s signing?

    2. 1.2

      It might indeed seem that way at first blush.

      And while the question is raised directly in the article as to whether or not “further review” is ALREADY underway (which if so, may be a separate issue, since I know of NO IPR record that does reflect any such review, and everyone knows that 37 CRF 1.2 still applies – that separate issue being along the lines of those “many other like programs” that exists next to the prior SAWS program).

      More sunlight always seems like an easy “fix.”

      But then again, some of the “judges” (or whatever word the Supreme Court might choose to use to signify that something else ) or other amici do not even view the proceedings as “trial like” at all.

      Is it too late to relabel them all as “Super Examiners”…?

      1. 1.2.1

        > Is it too late to relabel them all as “Super Examiners”…?

        They should be given a more descriptive name.

        How about “Lackeys”?

        Or, to show how hip we are (and bring in the young crowd): Minions!

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