Justices Scale Back “Unreviewable Authority” of Administrative Patent Judges

Foley & Lardner LLP

Foley & Lardner LLPThis article was originally published on SCOTUSblog on June 21, 2021, and is reproduced below in full with permission.

The Supreme Court ruled Monday that more than 200 administrative patent judges in the U.S. Patent and Trademark Office must be subject to greater supervision by the agency director in order to comply with the Constitution’s appointments clause.

The decision in United States v. Arthrex, Inc. was fragmented. The court ruled 5-4 that the level of authority exercised by the patent judges is incompatible with the Constitution because the patent judges are not nominated by the president and confirmed by the Senate. The court also ruled 7-2 that the proper remedy for that constitutional problem is to give the director of the USPTO the ability to review and alter the decisions of the patent judges. Chief Justice John Roberts wrote the opinion for the court. Justice Clarence Thomas dissented. Four justices partially concurred and partially dissented in various parts of the decision.

A decade ago, Congress passed the Leahy-Smith America Invents Act, creating a new administrative litigation regime in which almost anyone could challenge the validity of an existing patent. To oversee that litigation, Congress created the Patent Trial and Appeal Board, or PTAB, in the USPTO, an agency within the Department of Commerce. The adjudicators on that board are titled administrative patent judges. Unlike Article III judges and other “principal officers,” who are appointed by the president with Senate confirmation, the patent judges are appointed by the commerce secretary and are not Senate-confirmed. 

Arthrex, whose patent was challenged by Smith & Nephew and invalidated by the board, argued on appeal that the patent judges were unconstitutionally appointed. The U.S. Court of Appeals for the Federal Circuit agreed, ruled that the proper remedy was to remove the patent judges’ tenure protections, and remanded for a new hearing at the board. Arthrex, Smith & Nephew, and the government all asked the Supreme Court to weigh in. Arthrex argued that the Federal Circuit’s remedy did not cure the constitutional problem and that Congress should determine the proper remedy. Arthrex also argued that the invalidity decision by the board should be overturned as a result. Smith & Nephew and the government each argued that the patent judges were constitutionally appointed, but they disagreed on how the court should handle the remedy if the court believed there was a constitutional defect.

In a fractured ruling on Monday, five justices held that the patent judges’ “unreviewable authority” in patent proceedings is incompatible with their appointment by the commerce secretary. Only properly appointed principal officers can wield that level of authority, Roberts wrote. He was joined in that holding by Justices Samuel Alito, Neil Gorsuch, Brett Kavanaugh and Amy Coney Barrett.

With regard to the remedy, Roberts wrote that “a tailored approach is the appropriate one.” The America Invents Act “cannot constitutionally be enforced to the extent that its requirements prevent [the USPTO director] from reviewing final decisions rendered by [administrative patent judges],” Roberts wrote. And because Congress has vested the power of the USPTO in the director, the proper remedy is that the director “accordingly may review final PTAB decisions and, upon review, may issue decisions himself on behalf of the Board.” Alito, Kavanaugh and Barrett joined this holding. Gorsuch did not. Justice Stephen Breyer (joined by Justices Sonia Sotomayor and Elena Kagan) wrote a concurrence disagreeing with the appointments-clause holding but agreeing with Roberts’ remedy, thereby providing a total of seven votes for the remedy.

Importantly, this decision does not overturn rulings by prior panels of administrative patent judges. It merely provides litigants with an opportunity to seek discretionary review by the USPTO director of patent judges’ decision.

Stay tuned for in-depth analysis of the decision.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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