Supreme Court Ruling: United States v. Arthrex, Inc. - June 2021

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United States v. Arthrex, Inc., et al, Appeal No. 2019-1434 (Fed. Cir. June 21, 2021)

The Supreme Court issued its long-awaited decision today on the constitutionality of the Patent Trial and Appeal Board (PTAB). The Court held that the Administrative Patent Judges (APJs) who make up the majority of the PTAB are not constitutionally appointed under the Appointments Clause of the U.S. Constitution. To remedy this defect, a majority of the Court held that the Director has the authority to review PTAB decisions.

We covered the Federal Circuit’s original opinion in this case here, and have covered its impact on other cases routinely over the past year and a half.

The case involves the PTAB, the body designated to hear post-grant reviews including inter partes reviews, among other decisions at the Patent Office. The 200 Administrative Patent Judges (APJs) who make up the PTAB are appointed by the Secretary of Commerce. On appeal from an inter partes review, Arthrex challenged that the PTAB is unconstitutional. Arthrex argued that the APJs are principal officers as opposed to inferior officers, and that as principal officers they are not appointed by the President, as would be required under the Appointments Clause of the U.S. Constitution. That clause states as follows:

[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.

A panel of the Federal Circuit agreed with Arthrex, and fixed the problem by striking certain protections for the APJs, making them removable at will by the Secretary of Commerce. This, the panel held, “renders them inferior rather than principal officers.” Having purported to cure the constitutionality of the PTAB, the Federal Circuit remanded the case for a new hearing by a new panel of now-constitutional APJs. 

As the Supreme Court noted, “This satisfied no one. The Government, Smith & Nephew, and Arthrex each requested rehearing en banc, which the Court of Appeals denied.” Three petitions for certiorari were filed, which the Supreme Court granted.

In the majority opinion, Chief Justice Roberts, joined in relevant part by Justices Alito, Gorsuch, Kavanaugh, and Barrett, concluded that the APJs are principal officers. Because the APJs have the “power to issue decisions on patentability” that are not reviewed by a superior executive officer, they are not “inferior.” And while the Government and Smith & Nephew “assemble[d] a catalog of steps the Director might take to affect the decisionmaking process of the PTAB,” the Director did not have authority to review any PTAB decisions, and thus was not a “superior” officer to the APJs in that critical regard.

The final portion of Chief Justice Roberts’s opinion was joined by Justices Alito, Kavanaugh, Barrett, Breyer, Sotomayor, and Kagan. This majority concluded that the only appropriate remedy was to make PTAB decisions reviewable by the Director of the Patent Office. This solution made the APJs subject to a superior officer on the issue of patentability. These Justices opined that “[t]he Director accordingly may review final PTAB decisions and, upon review, may issue decisions himself on behalf of the Board.”

Notably, the Court held that its opinion only concerned inter partes review proceedings, and not reviews of patent examinations—another role assigned to the PTAB.

Justice Gorsuch dissented only with respect to the remedy. In his opinion, the Court should find the entire inter partes review system to be unconstitutional rather than attempt to sever certain aspects of it. Justice Gorsuch would have left it to Congress to re-create its preferred system bearing in mind the Court’s decision with respect to APJs.

In a separate opinion, Justice Breyer, joined by Justices Sotomayor and Kagan, disagreed about the interpretation and applicability of the Appointments Clause. They also opined that the APJs were not principal officers. However, conceding that a majority held otherwise, they joined the Chief Justice’s opinion with respect to the appropriate remedy.

Justice Thomas wrote a final opinion, joined in part by Justices Breyer, Sotomayor, and Kagan, in which he also opined that the APJs were not principal officers.

The opinion can be found here.

By Nika Aldrich

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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