Briefing begins in US v. Arthrex

US vs. Arthrex, 19-1434 (Supreme Court 2020).

Earlier this year the Supreme Court granted writ of certiorari on the PTAB appointments clause issues stemming from the Federal Circuit’s determination that (1) PTAB judges were Officers of the United States who should have been appointed by the President (rather than by the Secretary of Commerce), but (2) the appointments problem was curable by eliminating any statutory job security held by the judges (this reduced them to “inferior officers” who are properly appointed by a head of department, such as the Secretary of Commerce).  The court agreed to hear the first two questions, but not the third (regarding waiver/forfeiture).

  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.
  3. Whether the court of appeals in Arthrex erred by adjudicating an Appointments Clause challenge that had not been presented to the agency.

July 22, 2020 Memorandum for the United States.

The case involves three parties.

  • Arthrex, whose patent is being challenged in inter partes review. Arthrex brought the appointments clause challenge, but strongly disagrees with the severing “cure.”
  • Smith & Nephew, the IPR petitioner. Smith & Nephew fundamentally argues that the the PTAB judges are at most inferior officers and thus were properly appointed.
  • US Gov’t intervened in the lawsuit to defend the PTAB decision, and also argues that PTAB judges are inferior officers.

The first round of merits briefing has been filed by the US and Smith&Nephew.  As discussed below, neither party addressed the second question — they will have an opportunity to do so after Arthrex files its opening brief later this month. Additional amicus briefs are expected this week.

US Gov’t Brief:  In its brief, the US argues strongly that PTAB administrative patent judges “are inferior officers whose appointment Congress permissibly vested in the Secretary of Commerce.”  US Government did not address the second question of curing the Appointments problem.

For its analysis, the US attempted to align its argument with the Supreme Court’s approach in Edmond v. United States, 520 U.S. 651 (1997) (Inferior officers must be “directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.”).

The Gov’t brief walks through the ways that the Secretary of Commerce and USPTO Director (both presidential appointees) possess authority to direct and supervise PTAB judges:

  • The Secretary (in consultation with the PTO director) appoints the judges.
  • The Secretary can remove the judges for “efficiency” purposes and that includes “failing to follow their supervisors’ instructions.”
  • The PTO Director has “unfettered power to decide which adjudicators will sit on any Board panel.”
  • The PTO Director has power to “promulgate regulations governing Board proceedings; issue binding policy directives, including instructions regarding how the patent laws and USPTO policies apply to particular fact patterns; and determine which Board decisions are precedential and therefore binding on future panels.”
  • “The Director has additional prerogatives regarding the conduct of individual proceedings. He may decide unilaterally whether a particular inter partes or post-grant review will proceed at all, and he possesses substantial authority over any rehearings that the Board may grant.”

Role of Rulemaking: Note here that that one important question arises regarding the extent that the Director has “given-up” authority by rulemaking and by tradition.  Under the promulgated regulations as currently in operation, the PTO Director has delegated substantial authority to the PTAB and to the Chief Judge.  An important example of this is that the PTAB determines institution decisions. A question for the Court will be the extent that those prior rulemakings should be considered when analyzing the officer-status of PTAB judges.

Mechanical Turks: In its opinions, the Federal Circuit also analyzed the situation using Edmond. In its brief, the US asserts that the court’s approach is “deeply flawed.”  Most importantly, the US argues that Edmond should be seen as providing for a flexible and open ended analysis of the level of supervision and control; whereas the Federal Circuit followed a more “mechanistic” of distilling Edmond into three discrete criteria and then focusing solely on those.

Burdensome: An additional important criteria here has to do with the burdensome nature of having the President Nominate and the Senate Confirm a large number of administrative officials. From 1836-1975, the patent judges (then called examiners-in-chief) were appointed by the President.  However, the expansion of the patent system (and administrative state in general) began to identify those appointments as an unneeded burden on the President and thus shifted their appointment to the Secretary of Commerce.  I expect that some members of the court – such as Justice Gorsuch – will see this justification as carrying little weight.

74 thoughts on “Briefing begins in US v. Arthrex

  1. 6

    The AIPLA [the major organization representing patent attorneys] has just filed a consolidated amicus brief in support of reversal in these Arthrex cases. The AIPLA summary says that: “..while the question is a close one, the totality of the circumstances under the flexible analysis to assess whether an officer is ‘principal’ or ‘inferior’ supports finding that APJs are inferior officers who are constitutionally appointed. The brief explains that the Federal Circuit’s chosen remedy – severing application of Title 5’s federal employment removal protections to APJs and ordering the rehearing of each affected case before a new panel – risks creating significant uncertainty, delay, and lack of transparency and accountability in the patent system.”

    1. 6.1

      [I only found it surprising that the AIPLA Amicus Committee and Board found that “the question is a close one.”]

      1. 6.1.1

        If not close, would one need a ‘totality’ and ‘flexible analysis’….?

        I do not wonder what is a dividing line for various groups between “Ends justifies the Means” and wanting a lack of brightline reasoning exemplified by the buzz words of “a ‘totality’ and ‘flexible analysis’…

      2. 6.1.2

        eComp Consultants (eComp) has also filed an amicus brief, with a short but effective trashing of the Fed. Cir. decision below. [Will anyone but the opposing party support that decision?]

  2. 5

    It’s difficult to square the holding of this case with the holding in Oil States. Making the PTAB less ‘judge like’ makes it more executive branch like, and therefore more like the Executive is reversing or obviating the judgment of the Art III department when a patent is enforced. See, Oil States. The outlier here being the ‘dual jurisdiction ‘ of the Art III and the PTAB over an issued patent and of course the ability of the Executive to void the (final) judgments of the Art III department. In other words, you would have a stronger case for PTAB if it were more “judge like” not less. Further, it’s not the job of the Court to ‘fix’ statutes to make it easy on Congress, Congress wrote the statute, they can live with it. So what? if it’s ‘hard’ to confirm all these appointments, if it’s too hard Congress can just repeal the statute and get rid of the PTAB. And further, SCOTUS doesn’t take cases to affirm lower courts. My tea leafs say – reversed, they are officers (and they better be under the power granted by the scheme and affirmed by Oil States) of the US that need confirmed. Gorsuch has strong views on structured liberty (see, his book, it’s the civil rights issue of the present day) and making Congress feel the administrative burden of these admin tribunals they are creating, and the enabling door opened by Oil States, is the very least SCOTUS should be doing here.

    1. 5.1

      The outlier here being the ‘dual jurisdiction ‘ of the Art III and the PTAB over an issued patent and of course the ability of the Executive to void the (final) judgments of the Art III department. See, Hayburn’s Case.

      1. 5.1.1

        Regarding dual jurisdiction over an issued patent, are you saying that invalidity is an in rem action?

        1. 5.1.1.1

          If an Art III court can’t make a final determination – and not be collaterally 2nd guessed – by mistake, fraud, the claim undermined, etc. as to the determination of the case – an Article III court does not have jurisdiction over the case. And should not sit as Article III judges. See. Hayburn’s case. link to en.wikipedia.org
          It’s a fundamental issue guaranteed under our system of ordered liberty – 3 branches of government – and not a government of mixed powers.

          And yet, you have that very scenario with the novel creation of the PTAB. An Art III court making a determination, and yet PTAB subsequently able to obviate that determination due to PTO “mistake” in issuing the patent claims. This is the novel ‘dual jurisdiction” scenario presented by the PTAB ‘court.’ All other Art II ‘courts’ the best example being tax court – give collateral estoppel effect (claims and fact finding) to the other dual jurisdiction of the Art III determinations. Indeed, tax court even gives res judicata effect to other tax years (which it does no where else – each tax year is a new claim) in deference to the Art III court finding of fact and conclusions of law. PTAB in contrast gives no – zero – none – effect to any determination legal or factual to an Art III court even on the same claims and even between the same parties. In fact, PTAB is openly hostile to the Art III department, for example, not excepting a markman order as law of the case. The new PTO has moved the PTAB in the right direction by making PTAB apply patent law and not BRC to claims before it. Which was the fig leaf used by PTAB to ignore the Courts. But PTO still needs to drop the other shoe – administrative estoppel to issues of fact and law determined by a Court – like the tax court and every other ‘real’ administrative court (that follows the law) in the universe of admin courts does and has done since the creation of such admin courts.

          1. 5.1.1.1.1

            So i guess you could say that the Art III court no longer has in rem jurisdiction over a patent because of the PTAB Hayburn’s case scenario. The simple fact is the Art III branch can NOT make a determination between the parties – a final determination – because of the PTAB (under the Arthex case – the Executive himself basically) say oops we made a mistake issuing that patent claim. Story and Marshall are rolling over in their graves. Knock them off the entrance to SCOTUS and put up Breyer and Kennedy.

            1. 5.1.1.1.1.1

              iwasthere–lots of good points.

              I think cert will granted on a case where the PTAB invalidates a patent after jury found it not invalid and awarded damages but the judgement was not yet final.

            2. 5.1.1.1.1.2

              Why does the possibility of being mooted does not rob the judiciary of the power to make final determinations between parties? Is there some reason why courts cannot have in personam jurisdiction over the litigants at the same time that the USPTO has in rem jurisdiction over the patent?

              1. 5.1.1.1.1.2.1

                That happens fairly often, because roughly 80% of IPRs are in response to being sued in District Court. [But the majority of D.C. suits do not have a corresponding IPR.] But where both proceedings have jurisdiction over the same patent at the same time does not need to mean, and was not intended to mean, parallel costs and efforts. In most cases with most judges the D.C. action is nowhere near trial and is stayed for the PTO IPR outcome, since the IPR has statutory deadlines normally making it faster, and is much simpler, with many less possible issues, and less costly. The only issue an IPR can decide is 102 or 103 based only on patents and publications.

                1. BTW, does not another kind of dual jurisdiction over the same patent occur with dual ITC and D.C. proceedings?

            3. 5.1.1.1.1.3

              Why does the possibility of being mooted rob the judiciary of the power to make final determinations between parties? Is there some reason why courts cannot have in personam jurisdiction over the litigants at the same time that the USPTO has in rem jurisdiction over the patent?

              1. 5.1.1.1.1.3.1

                That would be fine if it actually worked that way. Unfortunately, when confronted with an actual circumstance in which a court delivered a final judgement for the plaintiff, and then subsequently the PTAB (after the judgment was final) invalidated the patent, the CAFC vacated the district court judgment.

                You imagine a world in which the court exercises jurisdiction over the parties, while the PTAB exercises jurisdiction over the patent itself, each proceeding independently of the other and without mutual interference. That is not, however, the world that the CAFC has actually given us.

                1. Greg, if the D.C. judgement was truly final the Fed. Cir. would no longer have jurisdiction to vacate it. The [very few] actual cases being so confused* are cases where the D.C. decision [of invalidity not proven] was litigated but that case was NOT actually final when the IPR decision was final, typically because damages were not finally determined.

                  *confused numerous times in comments here which do not ever citing a single actual case that was truly final and was reversed or vacated by the Fed. Cir. because of a later IPR decision.

        2. 5.1.1.2

          Since the Sup. Ct. decision in Blonder-Tongue v. Univ. of Ill. (1971) a final decision of INvalidity of all claims of a patent is in effect, in rem. It is, of course, by statute in PTO reexaminations and IPRs. [In both cases, that means appellate finality.]
          [Various arguments here are over decisions properly entitled “invalidity not proven,” which are not of in rem effect.]

          1. 5.1.1.2.1

            So you made my point. Apples and oranges as to whether another court in another case is invaliding a patent. And different rights being vindicated. Here, per the discussion is Arthrex – whether the Executive (you know? the Executive Department of the 3 parts of the government)? can collaterally undermine a determination between parties (a necessary requirement of Art III subject matter jurisdiction per Hayburn’s case) via the now very Executive PTAB via the Arthrex federal circuit saving (amendment) of the AIA statute. Why is this cohort of all people such defenders of an obviously corrupt mixed power scenario created by the AIA? The PTAB is NOT an Art III court and Arthrex says as much (and even weakens the case) to save that very unconstitutional statute? How about this? Read Hayburn’s case and distinguish the holding from the Arthrex decision in the Oil States scenario – the issue I originally raised. The ignorance of this cohort as to the proper functioning and distancing between the admin courts and Art III Courts – is – well – disturbing – disappointing really – as to a cohort of purportedly trained professionals as to property rights and Constitutional rights to ordered liberty. Good Lord people, it’s one of the listed grievances – Right.. In.. The.. Declaration of Independence – No Kings Courts! And yet Arthrex compounds the holding of Oil States to say just that. One would expect this professionally trained cohort to defend my position – not just rank misapply the law (Blonder Tongue is offensive collateral estoppel between Art III Courts and different parties – a completely different right being vindicated – a defendants day in court! Not, in contrast, the political Executive obviating an Art III determination) and wittingly confusing the separation of powers issue involved with this creeping erosion of rights of all kinds afforded by these expansions of admin courts.

  3. 4

    “deeply flawed”

    What’s deeply flawed is just how far PTAB “trials” are from real court, judge-and-jury trials — which our own govt stridently, unquestionably now readily admits to:

    Injustice #1: The Secretary can remove the judges for “efficiency” purposes and that includes “failing to follow their supervisors’ instructions.”

    Injustice #2: The PTO Director has “unfettered power to decide which adjudicators will sit on any Board panel.”

    Injustice #3: The PTO Director has power to “promulgate regulations governing Board proceedings; issue binding policy directives, including instructions regarding how the patent laws and USPTO policies apply to particular fact patterns; and determine which Board decisions are precedential and therefore binding on future panels.”

    Injustice #4: “The Director has additional prerogatives regarding the conduct of individual proceedings. He may decide unilaterally whether a particular inter partes or post-grant review will proceed at all, and he possesses substantial authority over any rehearings that the Board may grant.”

    Move along folks. No American justice here.

    . . . and while justice dies, Congress play footsie with Big Tech.

    1. 4.1

      If this upsets you, you’re going to be shocked when I tell you about immigration courts….

      I’d support eliminating the PTAB if it was part of an omnibus bill to dismantle article II courts across the board.

      1. 4.1.1

        Eliminating all administrative appeal panels to dump tens of thousands per year of various such decisions [Social Security, immigration, import exclusions, veterans benefits, lost airline baggage claims, etc., etc, etc.] onto Article III courts is physically impossible. They have no such capacity and it would be prohibitively expensive and time consuming for the parties in most cases. Even Gorsuch knows that. Just as one small example, do you really expect or want no appeal from any PTO examiner’s application decision except in a Federal Circuit proceeding?

        1. 4.1.1.1

          I agree. These Article II courts are a necessity.

          I think the solution with the PTAB is to make it more independent and make it a more in-depth trial. And put real teeth in preclusion.

          1. 4.1.1.1.1

            I actually generally agree that parties in Article II courts should enjoy most, if not all, of the rights they would get in an Article III court, including a neutral arbiter that is no beholden to or directed by a political appointee and robust due process.

            The problem seems to be that the more you make Article II courts look like Article III courts, the less advantageous Article II courts are, from a time, efficiency, and cost perspective.

    2. 4.2

      Certainly one of two chips Big Tech is going to collect in the new admin (if he gets over the line) will be more PTAB action and invalidity. The other being DOJ and FTC going back to sleep on the anti-trust.

      1. 4.2.1

        iwasthere: I agree.

        People don’t get how much of the election was driven by Wall Street and big tech.

        Big tech wanted Biden and probably were responsible for his election.

        Trade secrets is what they want. That way you can lock in talent at a low cost. No more worries of talent going off and creating a start-up that hurts your business.

      2. 4.2.2

        “Back to sleep”? What are you talking about? Last year saw the lowest rate of antitrust enforcement suits since the 1970s.

        link to images.app.goo.gl

        Antitrust enforcement peaked in the early years of the Obama administration.

        link to images.app.goo.gl

        If past is prologue, we can expect the incoming administration to reawaken the antitrust divisions in the DOJ & FTC (although not likely half so much as they should be reawakened).

        1. 4.2.2.1

          I think quality and the companies involved matters.

          For big tech Obama gave them carte blanche. Trump has started to come after them.

          The way to think about politics now in the USA is more like religion and purchased leaders that advocate for industries. Obama/Biden are definitely in the pocket of SV whereas Trump was not.

          I don’t think this is in any way an R or D thing but a money thing. Politics in the USA is now like it was in the late Republic in Rome where leaders are more concerned with their own private affairs and doing the bidding of those that put them in power rather than seeing after the Republic.

          Obama was a Trump with makeup. Biden is a deadhead that will do as it is told by the D party. My bet is that Biden will not last two years before we have Harris who is a wildcard and could do pretty much anything.

  4. 3

    My guess is that they will overturn the CAFC and just hold that the patent judges are not principal officers.

    But, in no case, will Moore’s judgement stand.

    1. 3.1

      “My guess is that they will overturn the CAFC and just hold that the patent judges are not principal officers.”

      My expectation as well, Night.

      Quick. Easy. Done.

      Next case.

    2. 3.3

      I am not so certain, Night Writer, on your first point.

      Even when one looks at the long history here, how many years were ‘super examiners’ appointed by the Pres?

      Sure, at one point, ‘for convenience,’ this was stopped, but the critical question becomes was that stoppage legitimate?

      What legal basis of legitimacy for that mere convenience is there?**

      But I certainly agree that the Moore ‘resolution’ cannot stand — that is pure legislation from the bench with a clear usurpation of the legislative function (as I have noted from the start of the case).

      **I do note that — as have we all seen many times — the Supreme Court is not always concerned with legal basis of legitimacy in their reaching of their Desired Ends.

      1. 3.3.1

        “**I do note that — as have we all seen many times — the Supreme Court is not always concerned with legal basis of legitimacy in their reaching of their Desired Ends.”

        Fer sure. Fer sure.

    3. 3.4

      Nope disagree. Depends on Amy. If she cuts the same gib as Gorsuch they are going be be principal officers (and need to start behaving like tax court, but that might be impossible under the statute appointing pto director, etc as the ‘court’) – otherwise Oil States cannot hold.

      1. 3.4.1

        Of course Thomas is the weak link. He’s weak on patents in general and separation of powers – meh, not his strong suit either.

      2. 3.4.2

        I hope you’re correct iwt.

        Given your excellent analysis above, perchance SCOTUS would take this opportunity . . . to rule the PTAB itself unconstitutional.

        Now wouldn’t that be something.

          1. 3.4.2.1.1

            “a leap too far”

            Yea, yea; I know. :-)

            But one can always hope . . . (a Kavanaugh – Barrett extended-range scissors?)

            1. 3.4.2.1.1.1

              Lol – thanks for reminding me that Barrett may serve as the pivot point of the two shears of the Kavanaugh Scissors.

              While holding a certain clarity of reasoning, that concept would require the Court to be amenable TO reasoning (as opposed to their historical preference of Ends justifies the Means).

  5. 2

    Re: “The Gov’t brief walks through the ways that the Secretary of Commerce and USPTO Director (both presidential appointees) possess authority to direct and supervise PTAB judges.” [And the authority of the former, by statute, to appoint them.]
    I wonder if the PTO had made such a thorough effort at the Fed. Cir. level below, if this Sup. Ct. review of that decision, and the delay and uncertainty as to APJ decisions, could have been avoided?

    1. 1.1

      I really wonder how much money Chien is going to get out of all this. Really hard to believe that money isn’t part of this as she is right there in Silicon Valley and talking about trade secrets which is the dream of the giant corporations to lockdown talent and forever be rid of the threat of start-ups.

          1. 1.2.1.1.1

            Compared to what things will look like after Chien gets trade secrets strengthened and patents further weakened.

          2. 1.2.1.1.2

            And Ben —again—did you recently have brain trauma not to know the difference between relative and absolute.

            The patent system under Obama was lost 80 percent of its value. And under Trump it probably regained 5-10 percent of its value.

            Under Biden I would predict that a patent will loss another 25% of its current value.

            If you are at the PTO, you should pay attention. We are on the cusp of losing patents in the USA. What is happening is big corporations I work with are deemphasizing patents and patents in the USA in particularly with emphasis being shifted to the EPO and China. It is a trickle now, but you can tell they are all experimenting with making the USA a secondary market for patents and to try and fight in Europe and China.

            1. 1.2.1.1.2.1

              “And Ben —again—did you recently have brain trauma not to know the difference between relative and absolute.”

              The ’15-’16 winter in Germany was a time of relative caloric plenty when compared to the Turnip Winter of ’16-’17, but one would typically not call it a food filled period. I still recognize the difference, and I think that if you’re being fair that you’ll recognize that your post at 1.2.1 did not indicate that these are relatively innovation filled days.

              I don’t know what to say to the rest other than I hope that doesn’t come to pass.

      1. 1.2.2

        Ben,

        What exactly did you mean by “easy-going?”

        You are the number one whiner about how tough it is to be an examiner.

        1. 1.2.2.1

          Have you recently had some brain trauma that might render you capable of grasping the difference between the job of examining as implemented by USPTO management and the platonic ideal of an examination? If no, I’m not going to try to explain.

          1. 1.2.2.1.1

            Your reply is a non-sequitur, Ben.

            I asked a direct and straight-forward question as to YOUR use of the phrase “easy-going.”

            You being clear on that point is obviously important in your retort to Night Writer, as well as your initial post at 1.2.

            That post at 1.2 contains NO semblance of any “platonic ideal of an examination,” so if you are now attempting to spin your stated selfish hope on a “non-instance,” you have zero basis for being smarmy here.

            Brain trauma or not.

            1. 1.2.2.1.1.1

              Ben’s point anon is just to disrupt any point made for patents or against the anti-patent SV.

              He wins by blowing smoke and being disruptive.

              I don’t know why you believe he is an examiner. He is way too clever for that.

              1. 1.2.2.1.1.1.1

                He most definitely does NOT win by mere blowing smoke, and my posts actually make sure that he loses.

                Quite opposite of your “and you take the bait.”

                1. Hi Shifty, and thank$$ for your comment.

                  (you just cannot get over your obsess10n with me, can you? – four days later on a pretty dormant thread, in a sequence that you have not been involved with, you just cannot resist that urge you have for reaching out to me)

                2. Except not – as has been shown in your overwhelming adoration and obsess10n with about 98.9% of your posts being to or about me.

                  Your own choices, my friend — you don’t get to hide from that.

                3. No. Thank$$$$$$$$ are to you.

                  (your mindless posts solely as an attempt to have a last word are on the schedule)

              1. 1.2.2.1.1.2.1

                Snowflake’s own designated expert concluded, as did we, that he is an incredibly sloppy reader, writer, and thinker.

                1. Back to the ACME plans, eh Shifty?

                  20 days after a last post, and not even having that post be my post, you attempt (p00rly) to have some type of last word — on a meme that that was p00r to begin with.

                  Y
                  A
                  W
                  N

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