Can Appointment of Administrative Patent Judges be Unconstitutional?

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For the Patent and Trial Appeal Board (“PTAB”), the Administrative Patent Judges (“APJs”) are appointed by the Secretary of Commerce in consultation with the Director of the United States Patent and Trademark Office.  For an inter parties review of a patent, three APJs conduct the instituted review and determine if claims of a patent are unpatentable.  Is the appointment of the APJs unconstitutional because it violates the Appointments Clause of the U.S. Constitution.?  The answer was YES! until the court remedied the APJs to be inferior officers.

The Appointments Clause of Article II of the U.S. Constitution provides in part:

The President…shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

In the recent case of Anthrex, Inc. v. Smith & Nephew, Inc., No. 2018-2140, 2019 WL 5616010 (C.A.F.C. 2019), Anthrex argued that the APJs who presided over their inter parties review were not constitutionally appointed because they were principal officers who must be appointed by the President with the advice and consent of the Senate.  The court found that the APJ’s are officers as opposed to employees because they exercised significant authority pursuant to the laws of the United States.  Buckley v. Valeo, 424 U.S. 1, 125-2 (1976). See John F. Duffy, Are Administrative Patent Judges Constitutional?, 2007 Patently-O Patent L.J. 21, 25, (2007) (concluding that administrative patent judges are officers as opposed to mere employees).  The court then decided whether the APJs are principal or inferior officers.  The Supreme Court explained that “[w]hether one is an ‘inferior’ officer depends on whether he has a superior,” and “inferior officers’ are officers whose work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.” Edmond v. United States, 520 U.S. 651, 662-63 (1997).  The Court in Edmond emphasized three factors: (1) whether an appointed official has the power to review and reverse the officers’ decision; (2) the level of supervision and oversight an appointed official has over the officers; and (3) the appointed official’s power to remove the officers.  See Id. at 664-65.  As to the first factor, the court found that there is no provision or procedure providing the Director the power to review, nullify or reverse a final written decision issued by a panel of APJs and thus there is insufficient review within the agency over APJ panel decisions. As to the second factor, the court found that the Director exercised administrative supervisory authority over the APJs based on his issuance of procedures and his authority over the APJs pay.  As to the third factor, the court found that the APJs may be removed only for cause as will promote the efficiency of the service.  See 5 U.S.C. § 7513(a).  Thus, the court held that APJs are principal officers under Title 35 and they must be appointed by the President and confirmed by the Senate and, since they are not, their appointment violates the Appointments Clause of the U.S. Constitution.

Since the appointment of the APJs violates the Appointments Clause, the court considered whether there was a remedy to make the appointment of APJs constitutional.  Title 5 U.S.C. § 7513(a) permits agency action against those officers and employees “only for such cause as will promote the efficiency of the service.”  The court concluded that the appropriate remedy to the constitutional violation was to partially invalidate the statutory limitations on the removal of APJs in Title 5.  The court held that the restriction on removal of APJs renders them inferior rather than principal officers.  In this case, the court held that the inter parties review decision was made by a panel of APJs that were not constitutionally appointed at the time the decision was rendered and vacated and remanded the decision to grant a new hearing by a new panel of APJs.  The court determined that the impact of this case was limited to those cases where final written decision was issued and where litigants present an Appointments Clause challenge on appeal.

Should the court have remedied the appointment of the APJs to be inferior officers thereby by not violating the Appointments Clause?  In the Anthrex case, the court found that the Director had no power to review and reverse the APJs’ decision and did not have the power to remove the APJs.  The court did not address a remedy for the Director to review and reverse the APJ’s decision.  It appears that the court would leave this up to Congress to address.  However, the court did address a remedy for the Director to have the power to remove the APJs.  While the court emphasized that the separation of powers is a “fundamental constitutional safeguard” and an “exceptionally important” consideration in the contest of inter parties review proceedings, the court usurped Congress’ separation of power in removing APJs from Title 5 to render them inferior rather than principal officers.  Even though Congress had passed legislation to grant the APJs certain rights under Title 5 for many years, the court did not allow Congress to take these rights away from the APJs through legislation.  The court should have maintained the appointment of APJs as unconstitutional, but left it up to Congress to remedy a legislative solution that did not violate the Appointments Clause by either having the APJs appointed by the President with the consent of Congress or pass legislation to make them inferior officers.

If the remedy fashioned by the court made the appointment of APJs constitutional, should the court have remanded the case back to a new panel of APJs for a decision on the merits?  While the court vacated the decision of the panel of APJs that were not constitutionally appointed at the time the decision was rendered, the court could have decided, sue sponte, the merits of the case based on the record before them.  If the court reviewed the record and rendered its own decision, the case would have a final decision.  However, since the court decided to remand the decision to grant a hearing by a new panel of APJs, this panel may rubber stamp the findings and decision of the prior panel of APJs.  In such a case, an appeal would ensue, and the court would have to decide the case again.  By remanding, the court has invited subsequent arguments that any case that was decided by a panel of unconstitutionally appointed APJs needs a new hearing.

Thus, the court has held that the appointment of APJs violated that Appointment Clause of the U.S. Constitution, but remedied a solution by severing Title 5 that applied to the APJs to make them inferior officers such that the appointment of APJs by the Secretary of Commerce in consultation with the Director of the United States Patent and Trademark Office was constitutional.  The court took away certain rights from the APJs that Congress granted and did not allow Congress to remedy a solution.  While rendering the APJs inferior officers, the court has invited arguments for a hearing with a new panel of judges in any case that was decided by a panel of unconstitutionally appointed APJs.

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