Supreme Court: PTAB Judges Unconstitutionally Appointed; Court Gives Director Supervisory Authority

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In United States v. Arthrex, Inc.,1 the Supreme Court held that Patent Trial and Appeal Board (PTAB) administrative patent judges (APJs) are unconstitutionally appointed. However, the Court resolved the problem by making PTAB determinations reviewable by the U.S. Patent and Trademark Office (USPTO) Director.

Chief Justice Roberts wrote the majority opinion. Parts I and II of the opinion held that APJs were acting as principal officers and were unconstitutionally appointed by the Director and not the President. Justices Alito, Gorsuch, Kavanaugh and Barrett joined (five justices). Part III of the opinion provided the judicial remedy by rewriting the statute to give the USPTO Director power to directly review PTAB decisions. Part III was only joined by Justices Alito, Kavanaugh and Barrett (four justices). Justices Breyer, Sotomayor and Kagan agreed in a separate opinion that the remedy was proper, but disagreed whether the remedy was actually needed.

The majority explained that there was no principal officer at any level within the executive branch who directed and supervised the work of APJs:

Given the insulation of PTAB decisions from any executive review, the President can neither oversee the PTAB himself nor attribute the Board’s failings to those whom he can oversee. . . . APJs accordingly exercise power that conflicts with the design of the Appointments Clause to preserve political accountability.2

  The majority held the following:

We conclude that a tailored approach is the appropriate one: Section 6(c) cannot constitutionally be enforced to the extent that its requirements prevent the Director from reviewing final decisions rendered by APJs. Because Congress has vested the Director with the “power and duties” of the PTO, [35 U.S.C.] § 3(a)(1), the Director has the authority to provide for a means of reviewing PTAB decisions. . . . The Director accordingly may review final PTAB decisions and, upon review, may issue decisions himself on behalf of the Board. Section 6(c) otherwise remains operative as to the other members of the PTAB.3

The Court therefore concluded that the appropriate remedy was a remand to the Acting Director of the USPTO to decide whether to rehear the petition filed by Smith & Nephew. The Court summarized its holding:

Today, we reaffirm . . . that the exercise of executive power by inferior officers must at some level be subject to the direction and supervision of an officer nominated by the President and confirmed by the Senate. The Constitution therefore forbids the enforcement of statutory restrictions on the Director that insulate the decisions of APJs from his direction and supervision. To be clear, the Director need not review every decision of the PTAB. What matters is that the Director have the discretion to review decisions rendered by APJs. In this way, the President remains responsible for the exercise of executive power—and through him, the exercise of executive power remains accountable to the people.4

Justice Gorsuch disagreed with the remedy and would have voided the PTAB decisions and left it to Congress to fix the problem.

Justice Thomas dissented, finding that Congress specifically labeled APJs as inferior officers. In addition, Justice Thomas argued that the remedy is inappropriate: “If the Court truly believed administrative patent judges are principal officers, then the Court would need to vacate the Board’s decision.”5

Takeaways

The Court essentially redrafted the statute to require that a party have the opportunity to petition the Director to reconsider, modify or set aside a PTAB Final Written Decision at the conclusion of each inter partes review (IPR). While the Court has decisively entrenched the PTAB as a political extension of the executive branch/President, any decision must still be supported by substantial evidence, not arbitrary or capricious, and in accordance with the law.6 Thus, the overall IPR practice is unlikely to be significantly changed. Interestingly (or ironically), the Court approved the current acting director of the U.S. Patent Office to supervise the PTAB, even though the acting director is not appointed by the President and performs the functions of the Director until the President appoints and the Senate confirms the Director.

The USPTO quickly responded to the Court’s decision and issued a notice implementing an interim procedure whereby review of a PTAB final decision may be initiated sua sponte by the Director or requested by a party to a PTAB proceeding.7 A party may request Director review of a final written decision in an IPR or post-grant review by filing a request for rehearing by the Director and concurrently submitting a notification of that request to the USPTO by email to Director_PTABDecision_Review@uspto.gov, copying counsel for the parties. Parties seeking Director review must limit their requests to 15 pages and may not make new arguments or submit new evidence outside the scope of the original IPR. The Director has the discretion to request additional briefing on specific issues and to request parties to provide new evidence.

Parties must choose between asking for rehearing from the PTAB and from the Director. However, if the PTAB does grant a rehearing, any rehearing decision may also be reviewed by the Director. If a party does seek review by both the Director and the PTAB at the same time, the request will be processed as a request for the Director’s review. Additionally, the Director can choose to review any decision sua sponte before a notice of appeal to the Federal Circuit has been filed or before the deadline to file a notice of appeal has expired. While the review by the Director will be de novo, parties cannot submit new issues or evidence unless it is at the request of the Director.

An advisory committee established by the Director will review the requests for Director review and recommend which ones merit review, but the ultimate decision will be up to the Director. The advisory committee will focus on material errors of fact law, novel issues of law or policy, and issues that have split board panels, among other criteria.


1 United States v. Arthrex, Inc., No. 19-1434, 141 S.Ct. 1970, 2021 USPQ2d 662, 2021 WL 2519433 (2021).

2 Id., 141 S.Ct. at 1982 (quotation marks omitted).

3 Id., 141 S.Ct. at 1987 (quoting 35 U.S.C. § 3(a)(1)).

4 Id., 141 S.Ct. at 1988.

5 Id., 141 S.Ct at 2006 (Thomas, J., dissenting).

6 5 U.S.C. § 706.

7 USPTO implementation of an interim Director review process following Arthrex (June 29, 2021).

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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