Today, the Supreme Court granted petitions for a writ of certiorari to review the Federal Circuit's decision in Arthrex, Inc. v. Smith & Nephew, Inc., in which the court of appeals held how administrative patent judges were appointed to the Patent Trial and Appeal Board ("PTAB") violated the Appointments Clause of the Constitution (Art. II, sec. 2, cl. 2). To prospectively remedy that violation, the court severed a portion of the America Invents Act restricting the way APJs can be removed, and vacated and remanded the PTAB's judgment for a new hearing. The Federal Circuit denied rehearing, with four judges dissenting.
The Supreme Court has granted certiorari on two questions that the government argued were common questions across the petitions filed by the petitioner (Smith & Nephew), patent owner (Arthrex), and government:
1. Whether, for purposes of the Appointments Clause, U.S. Const. Art. II, § 2, Cl. 2, administrative patent judges of the U.S. Patent and Trademark Office are principal officers who must be appointed by the President with the Senate's advice and consent, or "inferior Officers" whose appointment Congress has permissibly vested in a department head.
2. Whether, if administrative patent judges are principal officers, the court of appeals properly cured any Appointments Clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. 7513(a) to those judges.
Notably, the Supreme Court did not grant cert. on the government's third common question, which involved waiver/forfeiture of an appointments clause challenge. Of course, the Court would not have granted cert. if the Justices thought the appointments issue was waived.
Merits briefing from Smith & Nephew, Arthrex, and the government will begin on the two granted questions. There will likely be many briefs from amici. The Supreme Court has scheduled one hour of oral argument divided between Smith & Nephew, Arthrex, and the government. A decision in the case is likely expected no later than June 2021.
Arthrex presents yet another constitutional challenge to the PTAB. Two years ago, the Supreme Court upheld the constitutionality of IPR proceedings in Oil States v. Greene, holding that IPRs did not violate Article III or the Seventh Amendment. Justice Gorsuch and Chief Justice Roberts dissented in Oil States and it will be interesting to see if they are persuaded by the appointment clause challenge in this case. The Justices' views in Supreme Court cases involving judicial review of PTAB rulings (Thryv, SAS, and Cuozzo) may also be worth considering here. For example, Justice Alito, Justice Sotomayor, and Justice Gorsuch have supported strong judicial review in these cases.
The Supreme Court's decision in Arthrex could affect pending and future PTAB proceedings. There are, for example, around 40 PTAB cases in which the Federal Circuit remanded to the PTAB for a new hearing in light of Arthrex. The government filed a consolidated cert. petition on these cases. And for its part, the PTO has stayed Arthrex remands until the Supreme Court resolves Arthrex. These cases will likely sit until after the Supreme Court's decision in Arthrex.
If the Supreme Court answers the first granted question, yes, APJs are principles officers, the Court will likely address the second granted question, the remedy for the violation. Some Federal Circuit judges and commentators have argued that the Federal Circuit's remands were unnecessary because judicial severance of the America Invents Act is both prospective and retroactive. Bedgear v. Fredman Bros (Judges Dyk and Newman concurring opinion); A. Michaels, Arthrex Remands: Treat or Trick? Patently-O (July 19, 2020). The retroactivity issue was not significantly addressed, if at all, at the cert. stage. It will be interesting to see if retroactivity is briefed and considered by the Court in the context of the second question.
If the Supreme Court concludes that Congress needs to remedy how PTAB judges are appointed with legislation, the Court could stay the effect of its ruling. This would give Congress time to enact such legislation. The House Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on the appointment of PTAB judges in November 2019. However, the appointment of PTAB judges may be a low priority for Congress in 2021.
MBHB will monitor developments in Arthrex. In the meantime, litigants should carefully consider the potential impact of the Supreme Court's decision in Arthrex on their PTAB proceedings.