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Patent Challenges Muddled After Judges’ Legality Upended (1)

Nov. 1, 2019, 5:49 PMUpdated: Nov. 1, 2019, 8:30 PM

An untold number of legal challenges to granted patents may be on shaky ground after a Federal Circuit decision upended the legality of administrative patent judges.

The U.S. Court of Appeals for the Federal Circuit ruled that U.S. Patent and Trademark Office’s administrative judges were unconstitutionally appointed, and removed part of a 2011 law that set up the agency’s Patent and Trial and Appeal Board that barred judges from being fired without cause.

The precise impact of the ruling isn’t clear, but it’s left patent attorneys scrambling to assess the impact on individual challenges.

“We don’t know what’s going to happen now,” Charles L. Gholz, a patent attorney at Oblon McClelland Maier & Neustadt LLP, said. “There are scores, if not hundreds, of patent attorneys around the country trying to figure out what the hell this means for my case.”

The patent office is reviewing the decision, agency spokesman Paul Fucito said in an email.

Uncertain Impact

The Federal Circuit in its Oct. 31 opinion vacated and remanded a Patent Trial and Appeal Board decision to ax claims in an Arthrex Inc. patent for a surgical device, after finding that tribunal judges had too much power not to be classified as officers appointed by the president and subject to Senate confirmation.

“There are potentially dozens of decisions that will need to be redone, which will cost the USPTO and patent attorneys a lot of time and money,” Charles Duan, a patent lawyer and director of technology and innovation at Washington think tank R Street Institute, said.

The Federal Circuit has already pointed to Arthrex in canceling an upcoming oral argument and kicking a case involving Facebook Inc. and WhatsApp Inc. back to the PTAB. The court Oct. 31 vacated and remanded a PTAB decision invalidating claims in a Uniloc conference call method patent. The court said it did so in light of Arthrex and “the fact that Uniloc has raised an Appointments Clause challenge in its opening brief in this case.”

Now, some attorneys say, the door is open for litigants with recently decided PTAB cases on appeal to raise the constitutional question.

“Practitioners and parties to PTAB proceedings should be prepared for Appointments Clause challenges premised on the Arthrex ruling to arise in pending cases, as the Patent and Trademark Office itself decides how to address the Federal Circuit’s decision,” Naveen Modi, global vice chair of the intellectual property group at Paul Hastings LLP, said.

The Federal Circuit said its ruling only applies to cases where litigants present an Appointments Clause challenge on appeal. That means cases where the chance to appeal has passed, or where an appeal has already been decided, wouldn’t be affected because litigants waived that ground for appeal by not presenting it.

“They try to narrow it, obviously, by saying, ‘Hey, we are talking about APJ appointments and rehearings as it relates to the issue where their constitutionality was raised on appeal. They’re trying to narrow it so it doesn’t apply to all cases,” Steven Shape, a managing partner at Dennemeyer & Associates LLP said.

However, Shape said, “it’s a constitutional issue. I’m not sure they can limit it the way they suggest it.”

Iancu’s Clout

The ruling also expands patent office director Andrei Iancu’s clout by making it easier for him to remove the administrative judges.

“After this decision, the director can essentially fire them without cause,” Doug Robinson, an attorney at Harness Dickey & Pierce PLC. “They are more under the control of the director,” he said.

Some attorneys doubted that agency directors would use the power very often.

“There will be cases, but they are going to be extraordinarily rare. I don’t think this is a power the director will exercise more than once a decade, if that,” Gholz said.

—With assistance from Valerie Bauman.

The case is Arthrex, Inc. v. Smith & Nephew, Inc., 2019 BL 418700, Fed. Cir., No. 2018-2140, 10/31/19

To contact the reporters on this story: Kyle Jahner in Washington at kjahner@bloomberglaw.com; Ian Lopez in Washington at ilopez@bloomberglaw.com

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