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Federal Circuit Affirms Temporary Patent Head’s Review Power (1)

May 27, 2022, 3:49 PMUpdated: May 27, 2022, 6:48 PM

Commissioner Drew Hirshfeld had the authority to review administrative patent tribunal decisions even while he led the US Patent and Trademark Office in a temporary role, the Federal Circuit ruled, sparing the agency from potentially devastating consequences.

The decision is the latest twist in a case that has now has made two trips to the Federal Circuit and one to the Supreme Court. Arthrex Inc. was seeking to revive parts of a surgical device patent the Patent Trial and Appeal Board found invalid in a review requested by Smith & Nephew Inc. Arthrex challenged Hirshfeld’s power after he denied director review of its case.

Hirshfeld performed the duties and functions of the director for more than a year until Kathi Vidal, President Joe Biden’s nominee, took office in April. Arthrex argued Hirshfeld lacked authority to deny director review because he wasn’t a presidential nominee confirmed by the Senate and also wasn’t statutorily made an acting director.

The US Court of Appeals for the Federal Circuit disagreed in a precedential opinion, validating Hirshfeld’s ability to review Patent Trial and Appeal Board decisions, a power which the US Supreme Court granted to the agency’s director in US v. Arthrex.

Hirshfeld’s “exercise of the Director’s authority while that office was vacant did not violate the Appointments Clause,” the Federal Circuit held. The court also said Hirshfeld’s denial wasn’t barred by the Federal Vacancies Reform Act.

Potential Consequence

The panel at oral argument had questioned the potential consequences of ruling in favor of Arthrex. Such a ruling could cast doubt over all the PTAB’s inter partes review decisions issued during Hirshfeld’s tenure, the court said.

Arthrex’s argument could also be interpreted to mean that Hirshfeld didn’t have the power to sign off on patents issued under his watch, the court said. Just in the past decade, the PTO has issued over 668,000 patents signed by an inferior officer filling in for the director, according to Smith & Nephew.

The government had argued that such an outcome would be “devastating.”

The Federal Circuit also found that the PTAB had enough evidence to invalidate Arthrex’s patent claims, affirming the initial ruling that triggered Arthrex to start the litigation.

Delegating Review

Central to the appointments clause question was an 1898 Supreme Court opinion, United States v. Eaton, which the Federal Circuit said allows an inferior officer to temporarily exercise the powers of an absent principal officer.

Arthrex’s case was indistinguishable, the court said.

“The Commissioner was merely performing the functions and duties of the Director in the limited period between the former Director’s departure and the current Director’s arrival,” the court wrote.

The Federal Vacancies Reform Act, which dictates who can perform the functions and duties of a principal officer in an acting capacity, also doesn’t apply in this situation, the Federal Circuit said. The court interpreted the FVRA as applying only to non-delegable functions and duties.

“There is nothing in the Patent Act indicating that the Director may not delegate this rehearing request review function,” the court wrote.

Chief Judge Kimberly A. Moore as well as Judges Raymond T. Chen and Jimmie V. Reyna served on the panel.

MoloLamken LLP and Carlson Gaskey & Olds PC represent Arthrex. Wolf, Greenfield & Sacks PC represent Smith & Nephew Inc.

The case is Arthrex, Inc. v. Smith & Nephew, Inc., Fed. Cir., No. 18-2140, opinion 5/27/22.

(Updated with additional reporting)

To contact the reporters on this story: Samantha Handler in Washington at shandler@bloombergindustry.com; Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Adam M. Taylor at ataylor@bloombergindustry.com