November 1, 2019
In a surprising Opinion issued October 31, 2019, a panel of the U.S. Court of Appeals for the Federal Circuit held that the appointment of Administrative Patent Judges, charged with presiding over proceedings before the Patent Trial and Appeal Board, was unconstitutional.
Arthrex is the owner of a patent that was challenged in inter partes review by Smith & Nephew, Inc. and Arthrocare Corp. Review was instituted, and a panel of three APJs issued a final written decision finding the challenged claims to be unpatentable as anticipated by the prior art. On appeal, Arthrex challenged the appointment of the APJs as violating of the Appointments Clause of Article II of the U.S. Constitution.
Under the Appointments Clause, officers of the United States must be nominated by the President and confirmed by the Senate. However, the Constitution also provides for the appointment of inferior officers by the President alone or the heads of departments. The distinction between officers and inferior officers implicates important considerations related to the separation of powers. It prevents the President from delegating large amounts of his authority to ostensibly inferior officers who nonetheless operate without significant oversight or accountability to voters or Congress.
The Constitution does not define the differences between principal officers and inferior officers. Thus, it has been left to the courts flesh out those distinctions. Courts look beyond the nominal rank of the officer, and attempt to discern the extent of direction and control appointed officials have over the challenged officer or employee.
Upon review, the Federal Circuit determined that Administrative Patent Judges were principal officers, not inferior officers, and that their appointment violated Appointments Clause. APJs have authority to review and, in the appropriate circumstances, revoke patent rights, without having those decisions reviewed by any principal officer. Moreover, the Director of the U.S. Patent & Trademark Office has only a limited ability to remove APJs, on the ground of misconduct that has an adverse effect on the Patent Office.
The Federal Circuit’s solution was to sever the portion of Patent Act giving APJs protection from removal. The Court reasoned that even if the Director still lacked authority to review the decisions of APJs, the right to remove APJs without cause would provide significant restraint on their decision making, commensurate with the level of authority given to inferior officers.
The case will be remanded to a different panel of APJs. Beyond the instant case, this decision will implicate any other decision by the PTAB made by unconstitutionally appointed APJs, if at least one party raises that issue on appeal. This decision could affect any cases that are now on appeal, or that may be appealed, that were recently decided by a panel of the PTAB comprising unconstitutionally appointed APJs.