United States: Federal Circuit Says Appointment Of PTAB Judges Unconstitutional

Last Thursday, the Federal Circuit found the appointments of Patent Trial and Appeal judges unconstitutional, in part because the judges do not receive sufficient oversight from the Director of the United States Patent and Trademark Office (USPTO). Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 18-2140 (Fed. Cir. 2019). The court cured the violation by severing a statutory restriction on the removal of PTAB judges, rendering the judges "inferior officers" that no longer require presidential appointment. The court then vacated and remanded the Board's decision, requiring a new panel of PTAB judges to hear the IPR on remand.

The constitutional challenge stemmed from an appeal from the Board's final written decision holding claims of Arthrex's patent anticipated. In its appeal, Arthrex contended that the appointment of PTAB judges violates the Appointments Clause of Article II of the U.S. Constitution.

The Appointments Clause states:

[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.

U.S. Const. art. II, § 2, cl. 2.

PTAB judges are ultimately appointed by the Secretary of Commerce, in consultation with the director of the United States Patent and Trademark Office. See 35 U.S.C. § 6(a). Accordingly, the crux of the issue was whether the judges are "Officers of the United States" under Article II, and if so, whether they are inferior or principal officers; the latter requiring an appointment by the President.

Appellees first argued that Arthrex forfeited its Appointments Clause challenge by not raising it until the appellate stage. But the Federal Circuit disagreed, finding that this was "one of those exceptional cases that warrants consideration despite Arthrex's failure to raise its Appointments Clause challenge before the Board," most notably because the PTAB could not have provided the relief the Federal Circuit settled on.

Turning to the substance of Arthrex's challenge, the Federal Circuit noted that an Article II "Officer of the United States," as opposed to a mere employee, is someone who "exercis[es] significant authority pursuant to the laws of the United States." Due to such authority, Officers of the United States are accountable to Elected Officials under the Appointments Clause.

PTAB judges, the Federal Circuit stated, "exercise significant discretion when carrying out their function of deciding inter partes reviews." They oversee discovery, apply the Federal Rules of Evidence, hear oral arguments, and issue final written decisions containing fact findings and legal conclusions. According to the court, the substantial authority exercised by PTAB judges during IPRs renders them "Officers of the United States." Therefore, the remaining question was whether PTAB judges are principal or inferior officers.

In Edmond v. United States, the Supreme Court explained that "[w]hether one is an 'inferior' officer depends on whether he has a superior," and "'inferior officers' are officers whose work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate." 520 U.S. 651, 662–63 (1997). Although there is no exclusive criterion for distinguishing between principal and inferior officers, the Edmond Court emphasized three factors: (1) whether an appointed official has the power to review and reverse the officers' decision; (2) the level of supervision and oversight an appointed official has over the officers; and (3) the appointed official's power to remove the officers. Id. at 664–65 (1997)

Evaluating the status of PTAB judges, the Federal Circuit noted that the only two presidentially-appointed officers that provide direction to the USPTO are the Secretary of Commerce and the Director. Finding that neither of the officers exercised sufficient discretion to render PTAB judges inferior officers, the Federal Circuit ultimately designated the judges principal officers, thus requiring appointment by the President. The appellate court emphasized that no presidentially-appointed officer had independent statutory authority to review a Board's final written decision, and that PTAB judges may only be removed with cause.

To rectify the violation of the Appointments Clause, the Federal Circuit severed a portion of the Patent Act relating to removal protections. Due to the severance, PTAB judges may now be removed without cause. By partially invalidating statutory limitations on the removal of PTAB judges, the Federal Circuit "render[ed] them inferior rather than principal officers." The court then vacated and remanded the case to a new panel of PTAB judges, "[b]ecause the Board's decision... was made by a panel of [judges] that were not constitutionally appointed at the time the decision was rendered" and "when a judge has heard the case and issued a decision on the merits, he cannot be expected to consider the matter as though he had not adjudicated it before. To cure the constitutional error, another ALJ must hold the new hearing."

In the aftermath of the Arthrex decision, the Federal Circuit issued three orders indicating that it will not entertain Appointments Clause challenges if not raised in a party's opening brief, treating them as waived. In two precedential orders involving appellant Customedia Technologies, LLC, the court concluded that Customedia "forfeited its Appointments Clause challenge" because it "did not raise any semblance of an Appointments Claims challenge in its opening brief or raise this challenge in a motion filed prior to its opening brief." Customedia Techs., LLC v. DISH Network Corp., No. 2019-1001 (Nov. 1, 2019) (per curiam); Customedia Techs., LLC v. DISH Network Corp., Nos. 2018-2239, etc. (Nov. 1, 2019) (per curiam). But, in a case where the appellant did raise the Appointments Clause issue in its opening brief, the Federal Circuit vacated the Board's IPR decision and remanded for proceedings consistent with the Arthrex decision. Uniloc 2017 LLC v. Facebook Inc., No. 2018-2251 (October 31, 2019) (non-precedential).

We will continue to monitor this case for updates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions