One of my favorite aspects of the law is that something can be standard practice, or settled law, until a creative lawyer or court pulls it apart, turns it on its head, and a new paradigm is born. Think of Brown v. Board of Education, Miranda v. Arizona, or Citizens United v. Federal Election Commission. Each of these decisions upended the prior paradigm. A new case may be joining this list: United States v. Arthrex Inc. At issue is where the administrative patent judges of the U.S. Patent and Trademark Office fall within the U.S. Constitution: are they “principal officers”, nominated by the President and confirmed by Congress, or “inferior Officers” who can be appointed (and removed) by a department head within the Executive Branch? The Supreme Court will hear the case on March 1, 2021, and could invalidate a patent review process in place since 2011.
Background and Decision
The 2011 America Invents Act (AIA) established an “inter partes review” (IPR) administrative patent review process, as an ostensibly faster and cheaper process for challenging patents, compared to the court system. The AIA created the Patent Trial and Appeals Board (PTAB) to hear IPR cases, which currently includes over 250 “administrative patent judges”. The IPR process is imperfect, but the Supreme Court has upheld the constitutionality of IPR itself.
That may change. Medical device manufacturer Arthrex won multi-million dollar judgments for infringement against defendants Smith & Nephew and Arthrocare, and the defendants used the IPR process to challenge the validity of the underlying patent. The parties eventually settled the litigation but allowed the IPR process to continue. The PTAB invalidated the underlying patent, and Arthrex appealed to the Court of Appeals for the Federal Circuit (CAFC), arguing that the PTAB judges were improperly appointed and therefore lacked authority to invalidate the patent.
The CAFC examined the roles, authority, and supervision of PTAB judges and unanimously agreed that they were “principal officers” under Article II, Section 2 of the Constitution (the Appointments clause), rather than “inferior officers” who could be appointed and removed by the head of an Executive Branch department (e.g., the Commerce Department, which oversees the USPTO). To cure this defect, the CAFC invalidated the section of the AIA which stated that the Secretary of Commerce couldn’t remove the PTAB judges, and ordered that a new PTAB panel review the patent at issue. This panel would be comprised of judges appointed by the Secretary of Commerce, who could also be removed by the Secretary of Commerce – i.e., inferior officers under the Constitution.
On to the Supreme Court
This satisfied exactly nobody. All parties filed petitions for writs of certiorari, requesting review by the Supreme Court. The Supreme Court consolidated the cases for review, and requested briefing on whether the CAFC’s determination and remedy were correct. At least 27 amicus curiae (“friend of the court”) briefs have been filed, reflecting the high level of interest in the case. The brief by the United States solicitor general argues that PTAB judges are inferior officers, and pointed to various ways in which the Secretary of Commerce has authority over such judges (for example, procedures governing the conduct of PTAB proceedings, policy directives regarding the proper application of the law to specific fact patterns, the ability to determine which PTAB judges will hear a given case, and the ability to designate a given opinion as precedential). In addition, the brief pointed out that the Secretary of Commerce does currently have the authority to remove judges, on the same grounds as the removal of any other member of the civil service. Certainly, this is not unfettered authority, and that distinction appears to be one with which the CAFC took issue.
The Stakes Are High
This is surely not the plot of the next Marvel superhero movie – exciting it is not. And yet, the Supreme Court could invalidate the PTAB itself, affecting the future of millions, or billions, of dollars in intellectual property rights. How you view the case may depend on whether you support stronger or weaker patent rights; according to a recent analysis, the PTAB invalidated 84% of patents which went through the full IPR process. Undoubtedly, some patent owners would cheer a decision weakening or invalidating the IPR process.