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Patent Reviews in ‘Limbo’ As Supreme Court Takes Case on Judges

Oct. 14, 2020, 5:15 PM

The U.S. Supreme Court’s decision on the constitutionality of administrative patent judge appointments may set the stage for Congress to step in and resolve an issue that’s thrown over 100 patent cases into question.

The court Tuesday said it would review an appeals court decision that found Patent and Trademark Office judges are powerful enough to be principal officers under the Constitution, meaning they should have been appointed by the president and confirmed by the Senate.

In Arthrex Inc. v. Smith & Nephew Inc., the appellate court rendered the agency’s Patent Trial and Appeal Board judges inferior officers who are appointed by the Commerce secretary in consultation with the PTO director. To change the patent judges’ status, the Federal Circuit severed part of the law preventing them from being fired without cause, an approach that has caused controversy.

If the Supreme Court agrees with the Federal Circuit, dozens of patent cases will have to be reheard by the PTAB. But if the justices believe severance didn’t fix the problem, then much more of the patent office’s work could be cast into doubt, potentially placing the ball in Congress’ court to fix the tribunal.

“Really, it’s a question of whether we have the status quo, or whether Congress is going to be forced to act,” Matthew Rizzolo, a partner at Ropes & Gray LLP, said.

How the court handles the case could have implications for other agencies that also must grapple with the question of who qualifies as a principal or inferior officer. More guidance from the Supreme Court would be welcome, attorneys said.

“There’s no single criterion that distinguishes between a principal and inferior officer,” William Milliken, associate in Sterne Kessler Golstein & Fox’s trial & appellate group, said. Arthrex could provide a useful “data point” for making the call.

The Supreme Court has “not set forth any bright line rule,” Milliken said.

New Proceedings

In Arthrex, the Federal Circuit vacated a PTAB decision invalidating part of an Arthrex surgical device patent and sent it back for a redo with new, now constitutionally appointed judges. The court has remanded over a hundred PTAB fights for new proceedings.

The high court’s decision to review the case “leaves us in limbo” with those cases, Finnegan, Henderson, Farabow, Garrett & Dunner LLP appellate section leader Michael Jakes said.

The U.S. Court of Appeals for the Federal Circuit limited the scope of Arthrex to PTAB decisions made prior to the landmark appellate decision. If the justices think severance fell short of a fix, Arthrex’s impact may extend further.

Such a scenario, said Ropes & Gray’s Rizzolo, could make things “quite messy and quite complicated.”

“There may be disputes, or even litigation, surrounding what force, if any, prior final written decisions of unconstitutionally appointed judges would have,” Rizzolo said.

If this happens, “There would be pressure on Congress to act,” Tyson Benson, a patent attorney at Bejin Bieneman PLC, said.

Lawmaker Push

Lawmakers already have waded into the Arthrex issue. The House Judiciary IP subcommittee held a hearing last November on the Arthrex fallout, with experts discussing alternative fixes.

A congressional fix could be “as easy as a line” in the America Invents Act, which created the PTAB, “saying the director should have unilateral discretion to review all PTAB decisions,” Duke law professor Arti Rai said.

Rai, a former administrator of the Office of External Affairs at the PTO, led policy analysis on what became the AIA.

In addition to a patent judge appointments clause fix, stakeholders would want to address issues like patent eligibility and broader PTAB operations, Rai said.

Administrative Impact

A Supreme Court decision in Arthrex may carry implications for administrative law in other government agencies that could prove “pretty big,” John Duffy, a University of Virginia School of Law professor, said.

“If the court sustains the constitutionality of this, then it seems like more adjudications can be delegated to inferior officers as a final matter” just as, under Arthrex, PTAB judges still make the call in validity trials, Duffy said.

“What these judges can do is invalidate patents,” he said. And because the patent office director signs off on a patent’s issuance, the situation becomes “someone who is an inferior officer gets to veto the decision of a principal officer.”

The distinction between principal and inferior officers is one that “matters across the entire executive branch of government,” Saurabh Vishnubhakat, a professor at Texas A&M University School of Law, said. With Arthrex, “The Supreme Court has shown some significant interest in how these distinctions play out.”

Although the case may seem limited to the patent office, “The sort of legal principles the court spells out will be just as important to other areas of the law,” he said.

The case is U.S. vs. Arthrex et al, U.S., No. 19-1434, petition for review granted 10/13/20

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloomberglaw.com, Keith Perine at kperine@bloomberglaw.com

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