The Appointments Clause: Ensuring That PTAB Decisions Are Subject to Constitutional Checks and Balances
In Arthrex, Inc. v. Smith & Nephew, Inc., Appeal No. 18-2251, the Federal Circuit ruled that, under the then-existing statutory framework, administrative patent judges (APJs) were principal officers of the United States who must be appointed by the President of the United States pursuant to the Appointments Clause of the United States Constitution (U.S. Const., art. II, § 2, cl. 2.), rather than by the Secretary of Commerce. Severing the portion of the Patent Act restricting removal of APJs was sufficient to remedy this constitutional problem by rendering APJs inferior officers who could properly be appointed by the Secretary of Commerce.
The Patent Trial and Appeal Board instituted inter partes review (IPR) of Arthrex’s patent. After briefing and trial, the Board issued a decision finding the claims unpatentable as anticipated. Arthrex appealed, contending for the first time on appeal that appointment of APJs by the Secretary of Commerce violates the Appointments Clause. Appellees and the government argued that Arthrex forfeited its Appointments Clause challenge by not raising the issue before the Board. The Federal Circuit declined to find waiver, noting the exceptional importance of the issue and the inability of the Board to have remedied the issue on its own.
The Federal Circuit weighed three factors in determining that APJs were principal officers under the existing statutory scheme: (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. The Federal Circuit found that both the first and third factors weighed in favor of concluding that APJs were principal officers. The Federal Circuit then determined that severing a portion of the Patent Act restricting removal of APJs would be sufficient to reclassify APJs as inferior officers, rendering the remainder of the statute (including appointment of APJs by the Secretary of Commerce) constitutionally valid, capable of functioning independently, and consistent with Congress’ basic objectives in enacting the statute.
Because the IPR had been decided by a panel of APJs who had not been constitutionally appointed at the time the decision was rendered, the Federal Circuit vacated and remanded the decision and ordered that a new panel of APJs be designated and a new hearing be granted.
Don’t Hitch Your Trailer to Intended Use
In In Re: David Fought, Martin Clanton, Appeal No. 19-1127, the Federal Circuit ruled that a preamble description of the invention as a “travel trailer” was a structural limitation, and held that the Patent Trial and Appeal Board (PTAB) does not have to state the level of ordinary skill in the art in its decision unless the issue is disputed.
Inventors David Fought and Martin Clanton appealed the Examiner’s decision refusing their application as anticipated by a reference which described a conventional truck trailer such as a refrigerated trailer and by a reference which described a bulkhead for shipping compartments. The inventors argued that the phrase “travel trailer” used in their claims referenced a type of recreational vehicle and was limiting. The PTAB affirmed the Examiner’s rejection and found the preamble term “travel trailer” was a mere statement of intended use and did not structurally limit the claims.
The inventors challenged the Board’s decision that “travel trailer” did not limit the claims and for failing to state the level of ordinary skill in the art. The Federal Circuit reversed the Board and stated that the preamble can be limiting when the claims depend on the preamble for antecedent basis. Further, the Federal Circuit determined that references presented by the inventors indicated “travel trailers” needed to be towable and have a living area. Thus, “travel trailer” was a structural limitation of the claims, and the Court reversed the Board’s decision.
On the second issue, the Federal Circuit agreed with the Board’s finding that, unless a patentee places the level of ordinary skill in the art at issue and argues that it would alter the outcome, the Board need not articulate the level of ordinary skill in its decision.
Publication Shelved in Publicly Accessible Library Was Prior Art as of the Date it Was Shelved
In Telefonaktiebolaget LM Ericsson v. TCL Corporation, Appeal No. 17-2381, the Federal Circuit ruled that publications shelved in publicly accessible libraries may be publicly available prior art references as of the date of shelving.
TCL petitioned for inter partes review of a patent owned by Ericsson relating to wireless communications systems. The principal reference relied on by TCL was a foreign article, published in a German periodical with a cover date of May/June 1996. Ericsson argued that the foreign reference was not prior art because it was not publicly available more than one year before Ericsson’s earliest filing date. In support of its position, Ericsson submitted evidence that the article was not available at the UCLA library until October 1996. TCL provided evidence that the German reference was publicly available in the form of a letter from a German librarian. When the original librarian declined to provide a sworn statement and appear for deposition, TCL located a second librarian and filed a late declaration stating when the reference was shelved. The Board accepted the late-filed declaration over Ericsson’s objections and ruled that all of the challenged claims were unpatentable for obviousness. Ericsson appealed.
On appeal, Ericsson argued that the Board erred by (1) allowing TCL to file a late declaration corroborating the date of the reference’s public availability and (2) finding that the reference was publicly available. The Federal Circuit held that the Board did not abuse its discretion in allowing the late evidence because Ericsson had adequate notice and opportunity to respond, and because the interests of justice weighed in favor of admitting the evidence. The Federal Circuit then rejected Ericsson’s argument that public availability requires more than shelving a document in a library. The Federal Circuit distinguished this case, involving a journal that had been publicly available for at least thirty years, housed in a library that was accessible to the public, from cases where a single dissertation or thesis was housed in a library.
The Federal Circuit also affirmed the Board’s finding of obviousness, reiterating that a reference teaches away “when a person of ordinary skill, upon reading the reference, would be discouraged from following the path set out in the reference, or would be led in a direction divergent from the path that was taken by the applicant.” In this case, the article recited disadvantages, but did not suggest that the mode of operation would be ineffective.
Avoiding Ineligibility by Claiming a Specific Implementation That Improves Upon the Prior Art
In Koninklijke Kpn N.V. v. Gemalto M2m Gmbh, Appeal No. 18-1863, the Federal Circuit held that claims directed to improving the functionality of a tool that is part of a system do not necessarily need to recite how the tool is applied in the overall system in order to recite a technological improvement that is patent eligible.
Plaintiff-Appellant Koninklijke KPN N.V. (KPN) owns a patent generally directed to a device for error checking data. Claim 1 requires a “varying device” that includes a “permutating device.” The permutating device was used to manipulate the data position (bit position) relative to an ordered sequence. Dependent claims added a limitation that the varying device was configured to “modify the permutation in time.” KPN sued a variety of defendants in the District of Delaware. In a decision on the pleadings, the district court held all claims of the patent ineligible as directed to an abstract idea without an inventive concept. In step one of the analysis, the district court held the claims were directed to the abstract idea of reordering data. In step two, the court concluded that any inventive concept disclosed in the specification was not captured in the claims. KPN appealed the decision only for claims 2-4.
The Federal Circuit reversed. The court found claims 2-4 were directed to a non-abstract improvement to an existing technological process (error checking in data transmissions) based on the requirement that the original data be modified “in time.” The court explained this was a specific implementation of the way data is generated that improved prior art error detection systems, and analogized the case to Finjan, Inc. v. Blue Coat System, Inc., 879 F.3d 1299 (Fed. Cir. 2018). The court rejected the appellees’ argument that the claims were abstract because they did not recite a step of actually using the generated data to perform improved error correction. Instead, the court held the “more relevant inquiry” was whether the claims included an improvement, and concluded these claims did because the “in time” limitation was a specific solution to the problem of error correction. The court distinguished several prior cases related to data processing on the basis that the claims in those patent ineligible cases were so general as to recite mere abstract ideas implemented on a computer, and not specific functional advances. Because the appellees did not dispute that the “in time” limitation was an improvement over an existing process, and that the claimed “in time” limitation was the key to the disclosed invention, the court held the appealed claims patent eligible.