By Dennis Crouch
I have been repeating this mantra for quite a while – patents are political. In US v. Arthrex, the Supreme Court added an exclamation point. By design, the US governmental system places presidential political appointees at the top of each executive agency, including the US Patent & Trademark Office so that the US President can then be held directly accountable for the successes and failures. Note here that the accountability we’re talking about is political accountability.
The Federalist Papers (Hamilton) repeatedly focused on this issue, albeit not in the patent context: “The blame of a bad nomination would fall upon the President singly and absolutely.” Federalist 77, for example. Now, in the words of the Supreme Court, the Presidentially Appointed USPTO Director “is the boss.”
The Patent statute does not expressly provide for review of PTAB decisions by the PTO Director. In fact, it appears to state the opposite – “Only the Patent Trial and Appeal Board may grant rehearings.” 35 U.S.C. § 6. In Arthrex, the US Gov’t argued that the PTO director has effective authority to control outcomes through a variety of roundabout mechanisms. But, the Supreme Court found those inadequate: “That is not the solution. It is the problem.” The U.S. Constitution calls for a direct line of political accountability between the decisionmaker and the Gov’ts proposed approach blurs the line. Quoting Hamilton again:
It often becomes impossible, amidst mutual accusations, to determine on whom the blame or the punishment of a pernicious measure, or series of pernicious measures, ought really to fall. It is shifted from one to another with so much dexterity, and under such plausible appearances, that the public opinion is left in suspense about the real author.
The Federalist No. 70.
The key holding in Arthrex in this regard is that the USPTO Director now has the final say regarding Office Decisions, including previously unreviewable PTAB inter partes review decisions. Going forth, decisions by APJs in these cases are subject to review of by the Director. “The Director may engage in such review and reach his own decision.”
The practical result is that a political appointee is given direct input on each and every IPR decision. In some ways this is a fairly new thing for the PTO who has endeavored to keep its head down as a bureaucratic agency and create a sense of separation between the merits decisions and agency administration. That has now changed, and the PTO Director now has an express role to play with each and every merits decision. This court-ordered change will be done alongside changes required in the Trademark Modernization Act of 2020 which similarly provides the USPTO Director with authority in certain situations to “reconsider, and modify or set aside, a decision of the Trademark Trial and Appeal Board.”
The likely outcome here is that there will be an opportunity to petition to the director to reconsider, modify, or set aside a PTAB Final Written Decision at the conclusion of each inter partes review. I expect that in most cases that PTAB Director will not respond or simply issue a denial. And, although the PTO Director may be able to take into account political considerations, any decision must still be not-arbitrary, in accordance with the law, and supported by substantial evidence. 5 U.S.C. § 706.
But can an “acting director” review the decisions of the PTAB?
I would say no.
He is “performing the duties of,” so is there a reason in particular that this new duty cannot be performed?
Because he has not been appointed by the President and confirmed by the Senate.
Thanks CW5 – but I was asking for a DELTA of duties, and performance thereof.
While you are correct in that he has not been appointed by the President and confirmed by the Senate, such would implicate ALL duties and not merely this new one.
Unless (somehow) this new duty is somehow *special* in comparison to any other duty that may be being currently performed.
Is there something *special* ? Is this *specialness* traceable to the law as written by Congress – the single branch authorized under our Constitution to write the controlling patent law?
In US v. Arthrex the Supreme Court did NOT hold any part of the AIA itself unconstitutional. Only [surprise] the “rehearings” restriction [to the Board itself] in old 35 USC 6! Even that was only required by a partially-reluctant narrow majority. The unanimous end result from all justices, as expected, is that PTO APJs are junior officers and do not lose their civil service protection, which the Fed. Cir. below would apparently have deprived them of. [I.e., the “fix” was switched to the above.]
Also, as Dennis notes at comment 7.2 here there is no change in the right to appeal to the Federal Circuit from any new, and presumably rare, rehearing decision by the PTO Director. Obviously a legally baseless, politically based, Board reversal by the Director will not be sustained on appeal. The AIA’s statutory right to appeal to the Federal Circuit from an IPR decision was not affected. Nor is there any basis for restricting the Director from delegating the writing up of the [nearly inevitable] rejections of reconsideration requests of Board decisions.
“The AIA’s statutory right to appeal to the Federal Circuit from an IPR decision was not affected. ”
LOL – so, in other words, the NEED to actually have Article III standing – apart from the IPR process itself – is not affected.
In other words, there IS no guarantee to Article III processing of this brand new Director power because there was no prior guarantee to Article III processing of the dual-fora AIA mechanism.
Nice to have that clarified, eh?
Re anon’s “the need to actually have Article III standing [for CAFC IPR] appeal … is not affected.”
Yes, not affected by this Sup. Ct. decision. But the Fed. Cir. standing requirement [or level required] for IPR appeal vs the IPR statute or process itself has not been ruled on by the Sup. Ct., and I only recall one cert attempt so far? [One reason that there are not more cert challenges being that the vast majority of all IPR parties DO have standing, because they are being sued by or threatened by the patent owner.] [No prediction for an outcome if the Sup. Ct. ever does take cert.]
I begrudge no one from entering the Article III forum who has a legitimate right to be there.
I DO believe that there is no such real guarantee though merely coming from the Article I portion of the dual-fora AIA proceeding – which, and directly in point with THIS case – means that there is no such guarantee of an ability to challenge any Director over-ride in an Article III forum, and any such offering as a savings grace for Constitutionality cannot carry.
It is simply not good enough that some MAY have Article III standing for other reasons to save this newly scrivened law.
BTW, note that not a single justice, no matter how administrative-tribunal-disliking in general, voted for the party requested draconian solution of throwing out and re-trying thousands of all prior PTAB IPR administrative trial decisions.
BTW, I traced way back to at least the 1952 Patent Act the now-held-unconstitutional words of 35 USC 6 that “Only the Board of Patent Appeals and Interferences may grant rehearings.”
As I predicted, the Supremes have mucked things up.
If anything, I think this illustrates that we haven’t really arrived at a good solution yet.
Actually too no one else has picked up on this but the biggest flaw with the decision is that it is an advisory decision. There is no issue about the director reversing a decision as the director did not reverse a decision and this wasn’t even an issue raised on cert.
And yet the Scotus held that it would be unconstitutional for the courts to block the director from reversing a decision. Get it? This is an an advisory decision by the Scotus.
Actually, I am floored that no one else has picked up on this. I am pretty sure I am right. This is an advisory opinion. Just stunning what they did.
I think that you have confused the remedy with the issue to which the remedy is being instituted for.
Nope. I think you are the one confused and other people thinking about this.
The remedy was to issue an advisory opinion. Think more about it and re-read your Constitutional law.
I am not thinking about this incorrectly.
The remedy and the issue to which the remedy applies are distinct items.
Heed your own advice here, son.
Thanks Night –
Federal Circuit had vacated the PTAB decision. The Supreme Court then took a particular action, vacating the Federal Circuit decision and thus reinstating the PTAB decision. That particular part does not seem advisory.
But the other part is the Scotus said that it would not be unconstitutional for the director to reverse the PTAB. That part is advisory.
So the first part depends on the second part. So the first part is arguably an advisory decision as it depends on the second party which is unquestionably advisory.
I’d bet we are going to hear more about this from Constitutional scholars.
And just to be clear, consider this: as has been stated already in this blog there are possible Constitutional issues related to the director reversing the PTAB. So, suppose, another case comes up and it turns out that it is unconstitutional for the director to reverse the PTAB under section 6(c). Then this opinion would not be good law.
So do you see why it was advisory? It depends on a remedy where the Scotus issued an advisory opinion saying that something that was not in controversy but could is Constitutional.
I think we are going to hear more about this and the implications of remedies where the Scotus rewrites statutes.
What’s good for the goose is good for the gander. The Arthrex decision is written to suggest that the Director has plenary authority to deny patent applications in a similar fashion—i. e., to simply refuse to issue a certificate, despite appeals and whatnot. The patent bar (and Congress) have spent fifty years trying to limit the agency’s discretion on applications, giving them multiple appellate avenues and enforcing rigid structures. One could envision, for instance, a future Director in a trade war with China simply refusing to issue patents to state-owned patents on national security grounds. I know the chorus of voices here will cry “TRIPS” and say they cannot, but as between treaty obligations and national security ones, I think the latter will normally win out. Just noting that the same final review would likely be available for ex parte and even allowance decisions.
> the Director has plenary authority to deny patent applications in a similar fashion—i. e., to simply refuse to issue a certificate
Paging Mr. Hyatt. Mr. Gilbert Hyatt.
More seriously, that logic sort of changes the nature of patents from a “property right” to a “discretionary government-granted monopoly.”
…OR back to the “King’s privilege,” eh?
I think this is totally correct. Except that the Director’s actions will still be reviewable in court (or subject to a civil action). So, the Director can unilaterally overturn a large amount of agency work, but the Director’s decision will still be subject to the rule of law as enforced by the Courts.
I do not think that the assertion of challenging the Director’s action is necessarily guaranteed to be available through an Article III court.
Don’t forget that the focus here is on actions in the Article I portion of the two-fora AIA mechanism, and standing is not in play at this point.
But attempting to challenge the Director in an Article III forum will invoke the standing requirement.
I can’t help but wonder about the impact Arthrex will have on patents that were issued during a time when the PTO did not have a President-appointed and Senate-confirmed Director. This is the current situation at the PTO, as Drew Hirshfeld is only “performing the functions and duties” of the Under Secretary of Commerce and Director of the USPTO.
Another interesting point would be what happens if the Director actually reverses the PTAB. What kind of record would be required? Could the Director just reverse the PTAB without a full written opinion? Also, what would the Federal Circuit do with that kind of reversal, especially if there is no written decision by the Director in issuing that reversal? My guess is that, similar to what others have said, this power will either not be exercised at all or will become part of the POP. If the POP issues a decision, the Director could just attach his (or her) name to that decision and say that it is based on this authority. At least then, there would be a record that could be reviewed by the Federal Circuit and (possibly) used by PTAB panels as precedent.
As an added note, how would a reversal of the PTAB interact with the APA? Would any kind of decision be considered arbitrary and capricious, especially if there is no formal written decision?
Good point but my guess is the director will just do about what they can do now with TMs.
I would take a point of legal distinction between actions concerning trademarks and actions concerning the property nature of patents.
First, each draw their authority from difference sections of the Constitution.
Second, the nature of “Quid Pro Quo,” and what the laws are meant to provide are different. One major difference is that trademarks have an explicit “protect the consumer” aspect that makes the item NOT purely an item of the trademark holder.
My sense is that the bar and the Federal Circuit will demand some complicated process of briefing, and the agency and government will rightly want to keep it simple in line with the decision. That’s a one-way fight, though, and I can’t not see us overcomplicating the issue. It would be most compliant to just issue short one-line refusals or nothing at all within the 63-day appeals period. You can’t prevent parties from petitioning or sending letters or what have you, but in general I think they should only write where they reverse, and for obvious reasons they will want to button that up with a long opinion to demonstrate to the Federal Circuit it’s in compliance with the Constitution and not arbitrary or capricious.
It’s scary to think how quickly corporations could be choked out by an activist Director. How long before that happens? What about for patents that are preventing growth in ‘important’ industries, such as renewables? Scary times ahead it seems.
As noted by Justice Gorsuch, we already see activist Executive Branch activity by the PTAB “judges.”
Since The Director may grant or deny the Rehearing motion, according to Arthrex decision today, The Director would have to at least issue a written decision about the granting or denying on the basis of the merit, as per the rules today.
What happens today to the rehearing motions filed? As explained below the panel has to write a decision. Is the director going to write them for every case ?
Today for PTAB Rehearing : 37 CFR § 42.71(c) and 37 CFR § 42.71(d) applies
link to jonesday.com
Reconsideration/Rehearing Practice to Date
A request for reconsideration/rehearing is equivalent to a “motion to reconsider” in the federal district courts; the decision on the reconsideration itself is the “rehearing,” as no formal rehearing is conducted. In other words, the Board’s granting of a motion provides the requested relief without further argument from the parties.[6] Typically, in its written decision, the Board will outline each argument presented in the Request, address the arguments with specificity, and provide reasoning for either granting or denying based on the evidence brought to its attention in the Request.
37 CFR § 42.71(c) and 37 CFR § 42.71(d)
link to law.cornell.edu
Reconsideration and rehearing are directed to the body that rendered the decision.
This new path is NOT either of those.
37 CFR § 42.71(c) and 37 CFR § 42.71(d)
apply to 6(c) …the very section the Arthrex decision altered…
“We conclude that a tailored approach is the appropriate one: Section 6(c) cannot constitutionally be enforced to the extent that its requirements prevent the Director from reviewing final decisions rendered by APJs………..The Director accordingly may review final PTAB decisions and, upon review, may issue decisions himself on behalf of the Board. Section 6(c) otherwise remains operative as to the other members of the PTAB”
Section 6(c) for reference
‘‘(c) 3-MEMBERPANELS.—Each appeal, derivation proceeding, post-grant review, and inter partes review shall be heard by at least 3 members of the Patent Trial and Appeal Board, who shall be designated by the Director. Only the Patent Trial and Appeal Board may grant rehearings.
link to uspto.gov
All they did was to change 6(c) from panel to the director. How is it a different path ?
The remedy the Arthrex decision says is: rehear !
“We also conclude that the appropriate remedy is a remand to the Acting Director for him to decide whether to rehear the petition filed by Smith & Nephew.”
It is a different path because of the change.
It clearly is not what Congress wrote. Any past citations (as shown in the linked items) are also clearly distinguishable – because of the change.
Is this p00r scrivining?
Sure – but that does not change the fact that your attempted path is a new one. The old path and the new path are clearly – and materially – different.
Note further (as noted on another thread) – the official count of Justices actually joining (contrasted with ‘agreeing’ – whatever legal effect that is) the Section on remedy is NOT sufficient (being only four Justices).
Is this more p00r scrivining?
Sure.
The remedy the Arthrex decision says is: rehear !
“We also conclude that the appropriate remedy is a remand to the Acting Director for him to decide whether to rehear the petition filed by Smith & Nephew.”
How is the director going to rehear without the rehearing request ?
Then he has to reply back to that rehearing with some reasoning , like they do today ?
You seem to be being obtuse to the fact (and it is a plain fact) that the Court has written a new law.
If that is the case then USPTO will have to issue new rules / new guidance on how to ask the director for rehearings and how this new rehearing step will work. This will result in a new rule making / CFR
Without a Director or an Acting director this process to get to the first rehearing may take 6 months.
And then there will 300 of those rehearing filed.
… I have been clearly stating (and previously predicted) that the Supreme Court has mucked things up.
“The key holding in Arthrex in this regard is that the USPTO Director now has the final say regarding Office Decisions, including previously unreviewable PTAB inter partes review decisions.”
Seems like this article assumes that the patent process ends at the PTO. But, one has a right of appeal to the courts — which in theory are apolitical. The courts have the final say regarding enforcement of the patent statutes, not the Director.
I’m surprised that nobody in the Trump administration explained to Donald Trump that he had the right to bring Director initiated reviews of patents of companies that he did not like, such as Huawei, Amazon, Boeing(?), etc. Kudos to those people for biting their tongues.
>>Seems like this article assumes that the patent process ends at the PTO.
It does. When an IPR invalidates the claims that is the end.
To pick a not-so-small nit, the patent process is political.
Patents themselves are not.
It is true that patents (and PTAB trials) are political, but they (both patents and PTAB trials) are also fairly bipartisan and uncontroversial. In theory, today’s decision could mean that one party’s presidents will always appoint PTO directors who overturn PTAB invalidations while the other party’s presidents will not (roughly analogous to the way that the NLRB has long functioned).
In practice, however, I doubt that will happen. The current IPR/PGR regime enjoys broad, bipartisan support. Basically, in practice today’s decision means that the IPR/PGR system will continue as it always has. I do not expect that the Director will actually exercise the new powers all that often (if at all).
Agree. See also Breyer/Sotomayor/Kagan joining a Thomas dissent.
I actually think that this decision could ultimately result in *more* decisional independence for APJs, as the Director may end up using his independent review power less often than APJs currently feel indirect pressure to maintain uniformity on a position. Interesting downstream question as to whether, when the Director steps in to review a Board decision and issues a decision articulating a legal position, the Director can bind the Board on future decisions.
I would expect to see an occasional high-handed overturning of an opinion for precedent’s sake. We already see something like that now with expanded panels.
Sure. I expect that the new power will be used approximately as often as is the Director’s existing power to add herself to an expanded panel (i.e., extremely rarely relative to the total number of PTAB matters).
I agree.
Greg, don’t forget to click your heels while repeating broad bipartisan support.
Is this broad enough to include patentees whose patents have been subjected to an IPR?
Why are you attempting to bully and silence inventors?
Josh, I don’t read it that way.
I agree with Greg because I suspect that what is going to happen not much. That the Scotus writing in that the director can review and issue new opinions will not make much of a difference to the current practices.
Where the battle was lost was with CJ Smith who hired a core of anti-patent judges that wanted to invalidate patents. Part of the hiring process was an acid test as to whether you would burn the patents.
I think that had they merely held the AIA unconstitutional, then I think that Congress may have created a 145 escape to DC or an appeals board or something else that may have given the patentee more rights. As it is, I expect pretty much nothing to change.
The director now occasionally takes over the PTAB with giant panels and I expect rather than doing this the director will just grab the case him/herself. I would image that the next director will be a black or Hispanic woman as Biden seems to believe that is a necessary qualification for any position that Biden doesn’t care about but what a high profile that he has f’ed over everyone else for “equity.”
For all those with issues with the current president AND all those issues with the previous president – realize what the Supreme Court has been doing with placing more power in the Executive branch for patents.
A comment above about ‘goose and gander’ is only the half of it, with the (potentially extremely) large swings in the ‘pure politics’ of the Executive branch having this type of power.
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