Supreme Court Holds Patent Board Exercised Unconstitutional Power In Inter Partes Reviews, But Leaves Many Issues Unresolved

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Inter partes reviews (IPRs)—and other post-grant patent review proceedings at the US Patent and Trademark Office—have survived another constitutional challenge. The Supreme Court held that the authority historically exercised by administrative patent judges (APJs) in deciding IPRs is incompatible with their appointment to an inferior office. Vacating the decision by the lower appellate court, the Supreme Court found that final IPR decisions should be reviewable by the patent director. 

In United States v. Arthrex, Inc. et al., the Supreme Court held that the existing statutory structure for IPRs violated the US Constitution. Under the Appointments Clause, “[o]nly an officer properly appointed to a principal office may issue a final decision binding the [e]xecutive [b]ranch in the proceeding.” Historically, APJs issued final IPR decisions, which were unreviewable by the executive branch. But at the same time, their appointments did not comply with the Appointments Clause requirements for a principal officer. According to a majority of the Court, the violation derived from the inconsistency between APJs’ appointment and the unreviewable power they wielded. 

In the underlying decision, the Federal Circuit Court of Appeals purported to have remedied the constitutional violation by making APJs removable at will by the secretary of commerce. A majority of the Supreme Court expressly rejected that remedy, explaining that APJs are not meaningfully controlled by the threat of removal. This majority affirmed that only a principal officer may issue a final decision binding the executive branch in an IPR. 

But only a different majority of the Supreme Court reached agreement on an appropriate remedy for the violation.  That majority found that “[d]ecisions by APJs must be subject to review by the [d]irector.” It determined that the violation could be resolved by interpreting the statute to permit the director to “review final [Board] decisions and, upon review, … issue decisions himself on behalf of the Board.” It further determined that remand of the Arthrex proceeding to the director was appropriate to “provide[] an adequate opportunity for review by a principal officer.” In view of Arthrex, petitioners and patent owners dissatisfied with the APJs’ final IPR decision may now seek the director’s intervention—before any court appeal. Nonetheless, the Office must now decide, at least in the first instance, how and when a party may seek director intervention. Regardless of the answers, the new possibility of director intervention is unlikely to quickly resolve the huge backlog of IPRs that have been effectively placed on hold pending the Supreme Court’s Arthrex decision. 

[View source.]

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