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High Court Patent Review Ruling Helps Agency Head Shape Results

June 22, 2021, 9:52 AM

The U.S. Supreme Court decision that patent office judge decisions must be subject to the agency director’s authority could help the office iron out important issues before appeal.

Congress violated the Constitution’s appointments clause when it set up the Patent Trial and Appeal Board, Chief Justice John Roberts said in the court’s controlling opinion. To remedy the problem, the court gave the Patent and Trademark Office director the power to overturn decisions the board makes through the inter partes review process.

The decision could allow the director to smooth out the edges of sticky issues of administrative and patent law before they reach the U.S. Court of Appeals for the Federal Circuit on appeal.

“Some of the things that we see frequently analyzed at the Federal Circuit could be more frequently discussed at the rehearing stage with the director’s involvement, perhaps leading to greater uniformity,” Kayvan Noroozi of Noroozi PC in Los Angeles said. He cited issues including who should be listed as a real party in interest in an IPR, and the proper application of the obviousness and anticipation doctrines.

President Joe Biden hasn’t named a patent office director yet, however. The agency has been led by an acting director, Commissioner for Patents Drew Hirshfeld since former director Andrei Iancu departed Jan. 20.

“The U.S. Supreme Court has now held that the PTAB may continue its important work under the remedy provided by the court,” Hirshfeld said in a statement. “We look forward to PTAB’s continued service to our world-leading intellectual property system.”

Short on Details

The Supreme Court stopped short of laying out what the director’s newly established review should look like.

“There are a few statements that explain what needs to happen in very broad-brush terms, but beyond that, the court gave very little guidance as to specifics of what needs to happen next,” Erika Arner, partner at Finnegan, Henderson, Farabow, Garrett & Dunner LLP, said.

The court also didn’t explain whether it was up to the Federal Circuit, the agency, or Congress to outline the specifics. Attorneys expect the patent office will release guidance to create a formal mechanism for companies seeking the director’s review. The PTO didn’t immediately provide details following a request for comment.

“It might be proposed guidance in case the Federal Circuit wants to say more,” Arner said, but she expects something to come out quickly.

The agency acted in a matter of days to provide guidance for how to implement the Supreme Court’s 2018 ruling in SAS Institute v. Iancu, which forced the PTAB to consider all patent claims that are challenged in IPR, she said.

Small Power Increase

The decision gives the director a new avenue to assert power, but the position was already a powerful one at the agency.

“There’s vanishingly little power that was already outside the director’s grasp,” Joseph Matal, a Haynes and Boone LLP partner and former patent office official, said. He pointed to the director’s authority to make regulations through the rulemaking process. The director was also part of the recently created Precedential Opinion Panel, which issued decisions about important issues at the PTAB.

Scott McKeown, chair of the PTAB group at Ropes & Gray LLP, noted the Federal Circuit will still have the last say on PTAB decisions, which can be appealed to the court.

“Any director that wanted to reverse a panel is going to have to jump in and establish a record for appeal that will withstand that level of review,” McKeown said.

Attorneys don’t expect the director to get involved with highly fact-intensive questions or run-of-the-mill disputes, meaning the day-to-day functioning of the agency shouldn’t change too much.

Win for Judges

The ruling should be good news for PTAB judges, in terms of job protections and workload.

The Federal Circuit in October 2019 said PTAB judges were principal officers, meaning they had so much power they should be nominated by the president and confirmed by the Senate.

As a fix, the Federal Circuit severed from the Patent Act removal protections for judges, making it easier to fire them and rendering the judges inferior officers appointable by the Commerce chief under the Constitution.

The Supreme Court had a different fix for the problem: It gave the director the authority to review—and reverse—final decisions from the board. Matal said that was a positive change.

“Assuming that’s done in a public and transparent manner, I think that’s a better way of exercising policy control at the agency than through the threat of firing without cause,” Matal said.

Not only do the judges get their job security back but they also won’t have to rehear the hundreds of cases left in limbo. The Federal Circuit has vacated many decisions the board made before Arthrex and remanded them to be reconsidered by a new panel of judges.

The ruling makes those rehearings unnecessary, according to Sterne Kessler Goldstein & Fox PLLC attorney William Milliken. Instead, “it seems clear what is necessary, at least in cases where the challenge is preserved, is that the director have an opportunity to rehear the petition,” he said.

The case is United States v. Arthrex, Inc., 2021 BL 229487, U.S., No. 19-1434, 6/21/21.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com and Matthew Bultman in New York at mbultman@bloomberglaw.com

To contact the editor responsible for this story: Keith Perine at kperine@bloomberglaw.com

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