Arthrex on Remand: Commissioner of Patents Drew Hirshfeld and the Problem of Shadow Acting Officials

Editors note – I invited Professor Nina Mendelson (University of Michigan Law School) to author a guest post after reading her 2020 Admin. Law Review article titled “The Permissibility of Acting Officials: May the President Work Around Senate Confirmation?”  The revived Arthrex case raises temporary appointments issues and asks whether Dir. Hirshfeld has the legal power to fulfill the expanded job as required by the Supreme Court’s decision. — Dennis Crouch

Guest post by Nina Mendelson,

Following one Supreme Court decision posing dangers for the integrity of all sorts of agency adjudication, the ongoing litigation in Arthrex v. Smith & Nephew, set for argument in the Federal Circuit next week on remand from the Court, may well spawn another ruling with important implications for the administrative state. That is the question of how much latitude agencies have to operate notwithstanding vacancies in principal officer positions. This post will cover the major statutory and constitutional questions raised in the case.

(1) The litigation background.

In Arthrex, a case arising out of the Patent Trial and Appeal Board’s invalidation of Arthrex’s patent claims, the Court’s majority found a constitutional violation in the statute’s allocation of inter partes review authority to the administrative patent judges (for the most part not-Senate-confirmed) who serve on PTAB, reasoning in part that, to assure political accountability, a Senate-confirmed principal officer must have final decision authority. A different coalition of Justices agreed on the remedy of severing the statutory review constraint on the PTAB’s inter partes review decisions. The Court figured this ruling would leave the Presidentially-appointed, Senate-confirmed US Patent and Trademark Office (“USPTO”) Director with full review authority in those cases.  (My colleague Rebecca Eisenberg and I have criticized United States v. Arthrex and its implications over at the Notice and Comment blog.)

Problem not solved, unfortunately.  Along with many other positions across the government requiring Senate confirmation, the USPTO Director post has been vacant since President Biden’s inauguration, now 14 months ago. Recent years have seen substantial delays in both presidential appointment and Senate confirmation of top officials, with plenty of blame to go around for widespread vacancies.

President Biden finally nominated Kathi Vidal as the next USPTO Director on January 13, 2022, and her confirmation is pending in the Senate. Meanwhile, Commissioner of Patents Drew Hirshfeld, appointed by the Secretary of Commerce and not Senate-confirmed, is presently claiming the office’s authority pursuant to a 2016 document executed by the then-USPTO Director Michelle Lee. The document, relying on the Director’s general management supervision authority, purports to grant the Commissioner of Patents the authority to carry out the “non-exclusive functions and duties” of the USPTO Director if both the Director and Deputy Director posts are vacant. On the agency’s website, Hirshfeld is not described as “acting USPTO Director,” but instead as “performing the functions and duties of the . . . Director.” In that capacity, Hirshfeld denied review of the PTAB decision invalidating Arthrex’s patent claims on October 15, 2021.

The parties have asked the Federal Circuit to address whether Hirshfeld’s claim to act based on the delegation document violates the main statute authorizing the selection and service of acting officials, which is the Federal Vacancies Reform Act (“FVRA”) of 1998, or the Appointments Clause. A lot turns on this issue, because, as I and others have written elsewhere, this tactic has been increasingly used to fill vacancies in Senate-confirmed posts without complying with the FVRA’s restrictions on “acting officials.” Officials have relied recently on delegations to claim the power to lead the Social Security Administration, Bureau of Land Management, and the Fish and Wildlife Service, not to mention to serve as the Deputy Director of Homeland Security. The result is a significant corps of shadow acting officials who use a title something like Hirshfeld’s:  not, “Acting Director” or “Acting Secretary,” say, but instead, “Performing the Duties and Functions of the [USPTO] Director.” Perhaps unlike Hirshfeld, these officials may have little experience and may claim the ability to serve long past the FVRA’s time limits. Professors Jody Freeman and Sharon Jacobs have characterized this practice as among those making agency personnel overly vulnerable to inappropriate Presidential staffing decisions. The Federal Circuit has an unusual opportunity to assess its legality.

(2) The statutory issue.

Under the FVRA, the most recent iteration of the federal vacancies law first enacted in 1868, Congress carefully delimited who can serve as an “acting officer,” and for how long, when a Presidentially-appointed, Senate-confirmed (“PAS”) post is vacant. Appointments and confirmation take time under the best of circumstances, and Presidents need some ability to ensure the government can continue to operate. The FVRA authorizes acting service in a vacant PAS post by a “first assistant” or else a Presidentially-selected senior agency official (GS-15 level or the equivalent) or other official Senate-confirmed for a different post. The FVRA allows an acting official to serve for 210 days, extended to 300 days after a President’s first inauguration (or while a nomination is pending in the Senate and in some other circumstances).  But Hirshfeld is not qualified to “act” under these categories. He is not a “first assistant.” And although he likely was eligible to act under the FVRA as a senior agency official, the President did not select him.

Does the 2016 USPTO document authorize Hirshfeld to act even if the FVRA does not?  The FVRA’s main text suggests it cannot, because the statute’s “exclusivity provision” states that the statute is the “exclusive means for temporarily authorizing an acting official,” except for another statute “expressly” authorizing an acting official. The exclusivity provision specifically bars reliance on a statute “providing general authority” to an agency head to “delegate” or “reassign” duties. The FVRA’s legislative context also supports the conclusion that the delegation strategy is impermissible. At the time Congress took up the vacancies law for reform, Clinton Administration Attorney General Janet Reno had invoked the Justice Department’s organic statute to delegate the responsibilities of the Solicitor General and multiple Assistant Attorneys General, offices requiring Senate confirmation, to individuals whom the Senate had declined to confirm. That raised Congress’s ire. Besides the FVRA’s “exclusivity” provision discussed above, legislative history included statements that the bill was meant to clarify that this sort of reliance on general management statutes was foreclosed, (see p. 17), and to “restore [the] constitutionally mandated procedures” of Presidential appointment and Senate confirmation (see p. 8).

Some have argued that other language in the FVRA nonetheless implicitly permits the delegation strategy.  The argument here is based on the FVRA’s complex enforcement provision, 5 U.S.C. 3348. Section 3348 specifies – bear with me here — that an action taken “in the performance of any function or duty” that is not in conformity with the FVRA “shall have no force or effect” and, furthermore, may not be ratified later by a legally serving officer. But Section 3348 then defines “function or duty” “[i]n this section” as “any function or duty” that is “established by statute [or regulation]”—and “required by statute [or regulation] to be performed by the applicable officer (and only that officer).” For such a function or duty, the enforcement provision specifies that if the office is vacant, “only the head of such Executive agency” may perform it. Defenders of the delegation strategy have pointed out that the “required . . . to be performed by the applicable officer (and only that officer)” language means that the enforcement provision voids only nondelegable functions when carried out by an improperly selected official. In spite of statutory text limiting the special “function or duty” definition to “this [enforcement] section” (rather than the entire Act), delegation defenders go on to argue that delegable functions should be understood as broadly exempt from all the FVRA’s requirements. On that view, responsibilities of a vacant Senate-confirmed office may be delegated to any official notwithstanding the Act, unless they are functions vested by a statute or regulation in a particular “officer (and only that officer).” The government persuaded the D.C. Circuit to accept this argument in one recent case, but in a different agency setting, a D.C. district judge saw things differently. The main selling point of such a reading is that it would surely increase the flexibility of agency heads to get the government’s work done notwithstanding confirmation delays. Its advocates also claim support in some legislative history statements (e.g., p. 18).

On the other hand, legitimating the delegation strategy could largely eliminate the FVRA’s application and undercut the President’s incentive to formally appoint PAS officials and seek Senate confirmation. This is because courts have repeatedly found subdelegation of agency functions to be presumptively permissible, whether by statute or regulation. Meanwhile, statutory and regulatory provisions that restrict such delegations by assigning duties exclusively to a particular officer are very rare. This reading also would make trivial the language in the Act’s exclusivity provision specifically barring reliance on general delegation statutes. It would render the FVRA ineffective to address the concerns that motivated the 1998 Congress–the Clinton Administration Justice Department’s use of delegations to empower unconfirmed officials to carry out PAS office responsibilities. Some might be concerned that the FVRA would not be enforceable against delegations of PAS office authority because its main enforcement provisions apply to nondelegable functions. But the FVRA’s enforcement provision is not the sole means of enforcing the FVRA. Courts can set aside any agency action taken by unauthorized officials as contrary to law under the Administrative Procedure Act, though the action could still be upheld if it were ratified later by a properly serving official, as one federal district judge has explained.

(Arthrex also argues that the Court’s holding requiring a principal officer decision renders the USPTO Director’s review authority statutorily nondelegable under the FVRA, so that Hirshfeld cannot receive the authority by delegation. This argument is unpersuasive, however, because the Arthrex holding establishing directorial review is rooted in the Appointments Clause. The opinion eliminates statutory language rather than interpreting it.)

In assessing the challenge to Commissioner Hirshfeld’s review of the PTAB’s invalidation of Arthrex’s patent claims, the Federal Circuit thus has an important opportunity to weigh in on whether agencies can legally delegate around vacant PAS offices, without concern for the qualifications of the official or the length of time they serve, or whether, instead, the FVRA precludes the creation of such shadow acting officials.

All this said, if the Senate confirms Kathi Vidal as USPTO Director soon, the Administration has a chance to make this statutory issue disappear. Because the statute and regulations do not appear to preclude a USPTO Director from revisiting review of a PTAB decision, Vidal could independently reconsider and potentially ratify the October 15, 2021, Hirshfeld decision rejecting directorial review of the PTAB decision invalidating Arthrex’s patents.

(3)  The constitutional issue.

Arthrex also challenges Hirshfeld’s service as an Appointments Clause violation. Despite that clause’s requirement of Presidential appointment and Senate confirmation for principal officers, constitutional doctrine has long tolerated at least some “acting” service by unconfirmed officials. Although the courts have yet to decide precisely how much service the Appointments Clause permits—or for how long—the likelihood that Arthrex will succeed in establishing a constitutional violation is small. The leading Supreme Court decision, United States v. Eaton, decided in 1898, approved as constitutional an unconfirmed acting general consul’s service in Bangkok. The consul general took a leave of absence for illness, and a missionary was designated to “act” by the consul general (with the State Department’s approval) for roughly ten months until a properly commissioned vice consul arrived. The Court upheld the acting officer’s service in the principal officer role as constitutional, noting that the officer was doing the work “under special and temporary conditions.” (The Court later described the acting official as a properly serving inferior officer.)

The precedential reach of Eaton today is unclear. Although the Court permitted ten months of acting service in Eaton, one might consider consular work comparatively lower impact and the need to cover the post significant, given the difficulties of travel from the U.S. to Bangkok at the time. Perhaps ten months of acting service would not be constitutionally tolerable for highly consequential domestic positions. But Justice Roberts, writing for a majority in National Labor Relations Board v. SW General, also commented that the FVRA represents “Congress . . . account[ing] for [the] reality” that a Senate-confirmed office’s responsibilities may go unperformed if a vacancy arises, thus giving the President “limited authority to appoint acting officials to temporarily perform” those responsibilities. (emphasis added). This was dicta, since the Court found that the service of the official in question violated the FVRA and did not reach the Appointments Clause issue. But the Court may have been hinting that the FVRA’s identification of eligible acting officials and minimum authorization of 210 days of service might be generally constitutionally acceptable. Justice Thomas, concurring, was the only Justice to argue that the official’s service of more than three years without Senate confirmation should be considered an Appointments Clause violation as well. Lower court rulings have offered little guidance, generally rejecting Appointments Clause challenges to acting officials, although one district court found an Appointments Clause violation in an unconfirmed official running the Bureau of Land Management for fourteen months pursuant to a delegation document that the court also found to be invalid.

In this case, Hirshfeld’s significant power to decide, unilaterally, the validity of patent claims challenged in inter partes review weighs in favor of a stricter reading of the Appointments Clause. Hirshfeld is not Senate-confirmed even in the Commissioner position. On the other hand, Hirshfeld is not exercising Cabinet-level powers, and President Biden submitted a nomination for Senate consideration less than a year after Hirshfeld began exercising the Director’s powers. Other officials serving based on delegation documents have served far longer than Hirshfeld. A ruling that Hirshfeld’s service violates the Appointments Clause could disrupt the operation of numerous agency offices, since many officials have served for similarly lengthy periods. I have argued that the Appointments Clause ought be interpreted to permit only very short periods of acting service for Cabinet-level principal officers and roughly four months for below-Cabinet-level principal officers such as the Director, far shorter than Hirshfeld’s service. But under current doctrine, as vague as it is, Arthrex’s Appointments Clause argument looks to be a long shot. If Kathi Vidal is confirmed and undertakes an independent review of the PTAB’s decision on the Arthrex patent claims, that may obviate the need to address the Appointments Clause issue altogether.

Otherwise, however, the Arthrex litigation is one of the rare cases in which a court may have the opportunity to address the legality of the in-the-weeds strategy of delegating powers around vacant PAS offices. To make the FVRA effective and to encourage the President’s proper use of the confirmation process, the Federal Circuit should interpret the FVRA to prohibit the practice.

Nina A. Mendelson is the Joseph L. Sax Collegiate Professor of Law at the University of Michigan Law School. 

Does the Temporary PTO Director have Arthrex Authority?