Arthrex applies to: “All agency actions rendered by those [unconstitutionally appointed] APJs”

Virnetx Inc. v. Cisco Systems and USPTO (intervenor) (Fed. Cir. 2020) (precedential rehearing denial)

In Virnetx, the Federal Circuit issued a non-precedential decision remanding and vacating the PTO decision in light of Arthrex (unconstitutionally appointed PTAB judges cannot cancel a patent).  One difference between this case and artrex is that the Virnetx patents were cancelled via pre-AIA inter partes reexamination rather than inter partes review.  The court found the difference meaningless:

Although this appeal arises out of an inter partes reexamination and not an inter partes review as was at issue in Arthrex, we see no material difference in the relevant analysis. We therefore grant VirnetX’s motion.

Slip Op. (Opinion by Judge O’Malley and joined by Judges Moore and Chen). [VirnetxArthrexI].

The PTO immediately filed a petition for panel rehearing and rehearing en banc.  Those petitions have now been denied. However, the original panel has expanded upon its original opinion in with further justification.

The PTO’s particular contention goes as follows: PTAB judges may be acting as principal officers when ruling over AIA trials, but they are not so high-and-mighty when hearing an inter partes reexamination appeal (or presumably an ex parte appeal from a patent applicant). In response, the Federal Circuit explained that an individual’s Appointment status is associated with the whole person and is related to “all of that appointee’s duties.” See Freytag v. Commissioner of Internal Revenue, 501 U.S. 868 (1991).

The court thus concludes:

[I]f these APJs are unconstitutionally appointed principal officers because of their inter partes review duties in light of Arthrex, it would appear that under Freytag vacatur would be appropriate for all agency actions rendered by those APJs regardless of the specific type of
review proceeding on appeal.

Rehearing Denial. See also Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019) en banc denied in Arthrex, Inc. v. Smith & Nephew, Inc., 953 F.3d 760 (Fed. Cir. 2020).  Multiple petitions for writ of certiorari are likely coming soon in Arthrex.

Of some interest, the PTO requested that the mandate from that case be delayed, but that motion was denied by the panel. Fed. R. App. P. 41(d)(1).  The PTO had hoped to delay holding remand IPR trials in Arthrex and other similarly situated cases.  In its denial of the stay-of-mandate, the Federal Circuit explained its position:

The delay contemplated by the United States could cause harm. All the cases in this court that are in posture similar to that of Arthrex involve patent claims deemed unpatentable by the Board. The delay contemplated by the United States would cause the continuation of stays in those proceedings and in related proceedings in district courts. Those stays have the effect of leaving the patent claims in force and also could cause the continued obligation to pay fees under license agreements that (as is common) require payment until a final adjudication of invalidity. At the same time, the limited remand proceedings required by the Arthrex decision (in no more than 81 cases) do not seem especially burdensome, given the resources of the Board, which has more than 250 members. . . . We conclude that the public interest under these circumstances favors denying the stay.

ArthrexStayDenial (March 30, 2020) Note here that, the PTAB count is “more than 100 decisions” that have been vacated under Arthrex “and more such Orders are expected.” In a General Order, Chief Administrative Patent Judge Scott Boalick has now ordered “all such cases in administrative abeyance until the Supreme Court acts on a petition for certiorari or the time for filing such petitions expires.”  This General Order from the PTAB appears contrary to the spirit of the the above-quoted order from the Federal Circuit. I expect at least one of the 100+ patentees will attempt an emergency appeal of the general suspension of activity by the PTAB.


45 thoughts on “Arthrex applies to: “All agency actions rendered by those [unconstitutionally appointed] APJs”

  1. 5

    The IPO’s case report points out that:
    Because APJs were unconstitutionally appointed in light of their IPR duties, “vacatur would be appropriate for all agency actions.” Moreover, the Court explained that the proceedings are similar and that “[t]he Director’s authority over the Board’s decisions is not meaningfully greater in the context of inter partes reexaminations than in inter partes reviews.”

  2. 4

    Any thoughts on the APJ “Institution decisions” ?

    given the broad statement Arthrex applies to: “All agency actions rendered by those [unconstitutionally appointed] APJs”

    1. 4.1

      See 2.1.1.

      The reasoning in this case (leaning on the Supreme Court view that ANY impropriety infects ALL things), institution decisions fall into the infected category.

      All of this “C” talk though, must be making Greg and Paul a little uncomfortable.

      1. 4.1.1

        How does one circle this decision with the other post on May 6th


        CAFC: Arthrex Inoculated IPRs that had not yet reached Final Written Decision
        The theory of Arthrex is that the court’s cancellation of PTAB judge job security instantly cured the Constitutional appointments problem (making them inferior officers rather than principal offiers). Here, the Arthrex cure (Oct 2019) came just before the Caterpillar final judgment (Nov 2019). Caterpillar argued that it suffered under “a year’s worth of constitutional violations.” On appeal, however, the Federal Circuit ruled that the inoculation was complete against any IPR that had not yet reached final judgement.”


          One does not — they both cannot be correct.

          The problem of course is that the court here has taken on a role that is ultra vires in the first instance. The court lacks authority to rewrite the law that it merely ‘thinks’ that Congress would choose to write to fix the Constitutional problem.

          Concerning patents, this is not the first time that the Judicial Branch has overstepped its authority.


            So much Con law has been flipped on it’s head in the Fed Cir and SCOTUS bend over backwards attempts to save the TPAB and the notion that an IPR result is not rendering judicial decisions improperly advisory. I mean, why would giving the APJ less judge like attributes fix the appointments issue? If anything one would think MORE judge like attributes would be the way to go. Nope. It’s just so illogically at odds with the entire scheme of “dual” jurisdiction (admin and judicial) over patents. This entire notion of rewriting statutes started by Robert’s in the Obamacare decision. Just strike it down already and tell Congress to have a do over. It’s not the Court’s job to fret over “Washington’s” disfunction. We have the very worst SCOTUS ever when it comes to sep of powers and the admin state. The. Very. Worst.

      2. 4.1.2

        Why? There have been dozens of cert attempts and hundreds of personal allegations here and in other blogs alleging that the AIA, IPRs, or some aspect thereof, are unconstitutional. None obtained any judicial decision support whatsoever.
        The issue here is completely different, and has only been recently raised by the Fed. Cir. (which also says it has cured this issue itself). It is clearly curable, that way or in some other way, and it has to be, especially since it applies to all PTAB application appeals or any other Board decision.


          Why you ask?

          Because you are long on sniping from the sidelines (even as you do THAT again here) and short on actually engaging on the merits.

          That’s why.

    2. 4.2

      That might be too broad a sweep for institution decisions. Those decisions are not given to APJ’s by statute but are pursuant to powers delegated by rule from the Director, in a way similar to the examination functions delegated to examiners.

      1. 4.2.1

        Except completely different in the important aspect of the present decision (being that it IS a duty given to those that suffer from a Constitutional Appointments issue).

        Examiners do not have that issue, so attempting to draw a parallel there falls flat.

    3. 4.3

      You can’t read it literally like that. Institution decisions are not final decisions by the PTAB effectuating the cancelation of patent claims; they don’t do anything other than initiate review. Arthrex should not apply to institution decisions, as the panel decision was particularly concerned with agency actions that represent the “final word” of the agency, i.e., Final Written Decisions.

      But the Federal Circuit’s rationale in Arthrex has always left me wondering, why wouldn’t patent examiners with signatory authority (such as primary examiners) also deemed “principal Officers” under Arthrex? The Arthrex panel’s reasoning appears to be that APJs were unconstitutionally appointed because their Final Written Decisions represent the “final word” of the agency and can issue without any kind of automatic or systemic internal reivew by a properly appointed principal Officer (such as the Director). Patent examiners with signatory authority would seem to meet that definition as well, at least when they act in the capacity of granting patent claims or confirming existing or amended/new claims in reexamination or reissue. Granting a patent claim is just as big a deal is revoking it later, as the grant necessarily removes something from the public domain. If Arthrex is taken to its logical end, why it wouldn’t render appointment of the entire examiner corps (with signatory authority) be unconstitutional.

      1. 4.3.1

        Being “final” is NOT the point here in regards to a decision by an improperly appointed entity. The Supreme Court decision DOES “read it literally like that.”

        Examiners have always been able to be fired (and have had a union as long as I can remember.

        They simply have always been different enough such that the Appointment Clause was never at issue.


          “Examiners have always been able to be fired (and have had a union as long as I can remember. They simply have always been different enough such that the Appointment Clause was never at issue.”

          And APJs have always been able to be fired. But they are not members of a “union” [sic; professional association]. So if the APJs formed or joined a union or professional association (e.g. NTEU or POPA) that would remedy any Constitutional problems with appointment of AJPs?


          Anon, with respect, I don’t think you really understand the Arthrex decision. The key characteristic that made APJs into “principal Officers” in Arthrex was their ability to issue “last-word” final agency decisions on the patentability of claims, without automatic or systemic internal review by the Director or any other properly appointed “principal Officer.”

          The decision today confirms that point by extending Arthrex to inter partes reexaminations. Today’s decision made clear that all of the talk in Arthrex about APJs doing stuff earlier in IPRs, like overseeing discovery, applying the rules of evidence, etc., was simply filler and unimportant, as none of that happens in inter partes reexamination. The key to today’s decision was this statement: “APJs exercise significant authority on behalf of the government by issuing final decisions that decide the patentability of the challenged claims.” Slip. Op. at 4. That’s the key defining characteristic of IPR and reexam that makes APJs into principal Officers, thus creating the supposed constitutional problem.


            … and you don’t understand that the point is not extending the reasoning of Arthrex to the other jobs to see if those other jobs ‘trip’ the wire already tripped.

            Once tripped, ALL of those other jobs are tinged.

            The case that drives that is NOT Arthrex.

            The case that drives that is Freytag.


          > Examiners have always been able to be fired (and have had a union
          > as long as I can remember

          That’s not the point, Anon. Examiners are subject to the exact same Title 5 protections as APJs under 35 U.S.C. 3(c) (“Officers and employees of the Office shall be subject to the provisions of title 5, relating to Federal employees.”). Those Title 5 protections were what created the Appointments Clause problems for APJs in Arthrex, and they apply to examiners as well. So under Arthrex, they should also create problems for primary examiners, as they can issue a last-word decision of the agency with respect to granting patent claims. Again, I don’t think you understand Arthrex.


            No — come on LR, you are better than this.

            Examiners do not trip the first wire already tripped.

            The point vis a vis examiners is EXACTLY that they do not trip that first wire.


              “Examiners do not trip the first wire already tripped.


              “Examiners have not tripped A first wire, as APJ’s have already tripped a first wire.”

              That first wire IS the Arthrex decision.

              The extent of what is tinged is NOT driven by taking any OTHER particular task and seeing if that TOO trips the same wire as was tripped in the Arthrex case.

              The extent of what is tinged IS driven by the different case of Freytag.

              Any and all insertions here that somehow examiners themselves are tinged with the Arthrex case is nothing more than FUD.

      2. 4.3.2

        You said: “Granting a patent claim is just as big a deal is revoking it later, as the grant necessarily removes something from the public domain. ” Totally disagree. And the fallacy of “removing from the public domain” is wrong headed at best. See, for example, the land grant patents.

  3. 3

    “The PTO’s particular contention goes as follows: PTAB judges may be acting as principal officers when ruling over AIA trials, but they are not so high-and-mighty when hearing an inter partes reexamination appeal (or presumably an ex parte appeal from a patent applicant). ”

    This is right up there with Drumpf’s lawyers “arguing” that the Nixon and Clinton cases are “too recent” to be relied on as precedent.

    1. 3.1

      “This is right up there with Drumpf’s lawyers “arguing” that the Nixon and Clinton cases are “too recent” to be relied on as precedent.”

      I didn’t hear about them doing that, but that is a good argument, I like it lulz.

  4. 2

    In further view of this Virnetx Arthrex-follow-on decision re PTAB reexamination appeals, as I had questioned before, does it not also apply to PTAB reversals of examiner rejected applications?

      1. 2.1.1

        This (dicta?) on page 4 catches my eye:

        While it seems that, on this point, Freytag sweeps broadly and would apply to all Board proceedings, we need not go so far.

        I see nothing in Freytag that does NOT sweep broadly and that would permit the CAFC to decide otherwise.

      2. 2.1.2

        I’m not so certain that’s the case. If the examiner rejects an application, and the Board reverses, the patent doesn’t automatically issue. The Director still has the final word — as Judge Rich noted in Alappat.


          J. Rich noted in Alappat that the statute existing then may not completely handcuff the Director, but neither did it give him unbridled discretion. Doesn’t matter much because current 37 CFR 41.54 requires that the Board’s decision must be carried into effect. This unambiguous language must be followed under Kisor.


            The rule says only that the examiner shall take action to carry into effect the Board’s decision. It says nothing about the Director. The relevant portion of Alappat is at page 1535:

            “Moreover, the Commissioner is not bound by a Board decision that an applicant is entitled to a patent. Only a court can order the Commissioner to act, not the Board. Even though Board members serve an essential function, they are but examiner-employees of the PTO, and the ultimate authority regarding the granting of patents lies with the Commissioner. For example, if the Board rejects an application, the Commissioner can control the PTO’s position in any appeal through the Solicitor of the PTO; the Board cannot demand that the Solicitor attempt to sustain the Board’s position. Conversely, if the Board approves an application, the Commissioner has the option of refusing to sign a patent; an action which would be subject to a mandamus action by the applicant. The Commissioner has an obligation to refuse to grant a patent if he believes that doing so would be contrary to law.”


              The process in the USPTO is that the Examiners examine patent applications. The Director cannot suddenly swoop in and take over a particular application absent extenuating circumstances. That would violate the APA.

              You also need to recognize that the current version of 37 CFR 41.54 was written after Alappat. It doesn’t matter what authority the Director MIGHT be able to exert under the statute. Once that regulation was voluntarily put in place by a prior Director, thereby voluntarily surrendering some of the authority that might have otherwise been exerted, it was binding. The recent Kisor supreme court opinion explains that government agencies have to follow their own unambiguous regulations.

              Although not much is written about it, the current statute under the AIA now restricts the USPTO in some ways. As a “tradeoff” for IPRs, 3rd party prior art cannot be considered late in the process (or even made part of the record). In a similar vein, the remedy for erroneously granted patents is IPR or PGR.



          I think that focusing on “examiner” misses the actual point here that Paul at post 2 (and Prof. Crouch in response at post 2.1) are talking about.

          The ‘tinge’ from Arthrex through Freytag is NOT aimed at whatever the examiner is doing.

          Instead, the ‘tinge’ is aimed at whatever the already first wire-tripped Appeal Board members are touching.

    1. 2.2

      Interesting Paul – so there is a Constitutional infirmity for PRE-grant applications (which arguably do not have all the sticks in the property bundle)…

      I have to wonder then whether they may be a QUICKER challenge of either the CAFC re-writing of law (their fix) or the limitation and assertion that THAT fix was “instantaneous” (or properly provides a ‘ceiling’ on the number of such cases tinged with the appointments clause issue).

    2. 2.3

      Surely so, yes. That is how I read Arthrex, and what I told my clients at the time.

  5. 1

    Would be better for those patentees to pursue their infringement claim in district court since their patents have not been cancelled nor reviewed by any legal authority.

      1. 1.1.1

        I think that what Josh was surmising (without saying) was that a stay at the PTAB shifts the ball back to Article III land.

        In such a case, lifting the PTAB stay is immaterial (and possibly counter to) the move back to Article III land.

        (I am NOT saying that Josh’s reasoning is correct — I am merely attempting to translate the comment; here, my translation may well be off, and in such a case, I will invoke the great Emily Litella.


            [I thought Josh was asking if some D.C.s could Partially lift their stays to allow Markmans and discovery just on infringement to proceed while validity would remain stayed* at least until the Supremes rule on the pending Arthrex cert petitions?]
            *In those D.C. cases that are stayed for IPRs – not all are.

      2. 1.1.2

        And I suspect many district courts would be reluctant to lift a stay if the PTAB decision subject to vacatur would have cancelled the claims, as the vacatur was a technicality having nothing to do with the merits. If the PTAB decision was adverse to the claims, it kind of deflates the patent owner’s argument in litigation that it will be prejudiced from further Arthrex-caused delays. I expect most district courts in this situation will simply let nature take its course with the expectation that a properly appointed panel APJ would likely confirm the earlier decision after remand.


          LR – you are most likely correct with a ‘rubber stamp’ of what went before.

    1. 1.2

      If it were my patent, I would explain to the district judge that the PTAB decision is ultra vires in the same way it would be if the PTO janitor had written the decision. I would also point out that I don’t intend to consent to review by a different panel that also has no expertise in the subject matter, was hired by Google, and has an 80% invalidation rate.

      Further, I would explain that even if a new panel were to reach the same incorrect determination, that it would not have a preclusive effect on the infringement litigation under Blonder-Tongue. I would challenge to infringer to introduce the decision by the illegal PTAB “judges” as evidence in a motion to dismiss.

      All this assumes the patent was improperly invalidated by the PTAB miscontruing the claims and excercising hindsight bias, which is about half of cases.

      1. 1.2.1

        I would also point out that I don’t intend to consent to review by a different panel that …

        Great. Let me know how that works for you.

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