SCOTUS Decides Arthrex: Much Ado about Inter Partes Reviews

On June 21, in United States v. Arthrex, the U.S. Supreme Court ruled in a 5-4 opinion that Patent Trial and Appeal Board (PTAB) Administrative Patent Judges (APJs) are unconstitutionally appointed under the Appointments Clause of the Constitution.

Specifically, Chief Justice John Roberts, writing for the majority, concluded that “the unreviewable authority wielded by APJs during inter partes review is incompatible with their appointment by the Secretary [of Commerce] to an inferior office…Congress has assigned APJs ‘significant authority’ in adjudicating the public rights of private parties, while also insulating their decisions from review and their offices from removal.”

The court then answered the question of what it should do if administrative patent judges were found to be unconstitutionally appointed. Rather than turning to the draconian result advanced by Arthrex and invalidating the entirety of inter partes review (IPR) proceedings, the court, by a 7-2 vote, utilized the modern severability doctrine to sever the unconstitutional sections of 35 U.S.C. § 6(c), while leaving the remainder of the statute intact.

A Tailored Approach

Here, applying a “tailored approach,” the court held that the director of the U.S. Patent and Trademark Office (USPTO) must be able to review final PTAB decisions rendered by administrative patent judges and, therefore, have the final word.

The court explained that allowing such review renders APJs inferior officers that are validly appointed by the Commerce Secretary. In so doing, the court invalidated part of 35 U.S.C. § 6(c), which provides that “[o]nly the Patent Trial and Appeal Board may grant rehearings.”

The Supreme Court’s decision makes clear that the USPTO director may—if it so chooses—review IPR final written decisions of the PTAB.

The court made sure to highlight two points in this regard. First, the director “need not review every decision of the PTAB.” The USPTO provided guidance June 29 on how this would work in practice by implementing an interim rule to address the court’s mandate.

Specifically, in this interim procedure, a review may be initiated “sua sponte by the Director or requested by a party to a PTAB proceeding.”

Second, the court’s opinion extends to only IPR proceedings and did “not address the Director’s supervision over other types of adjudications conducted by the PTAB, such as the examination process for which the Director has claimed unilateral authority to issue a patent.”

As a practical matter, while the APJs are now divested of final authority over IPR decisions, it remains to be seen how often the politically appointed director will step in to review the decisions from the APJ’s three-judge panels.

Many practitioners believe that given the extensive experience of the APJs, it will be a rare occurrence for the director to reverse a panel’s decision. And even if the director does intervene, the U.S. Court of Appeals for the Federal Circuit will continue to act as an appellate backstop to catch any outlier PTAB decisions.

To that end, many practitioners believe the Arthrex decision essentially maintains the status quo with IPRs and the PTAB.

This column does not necessarily reflect the opinion of The Bureau of National Affairs,Inc. or its owners.

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Aziz Burgy is a partner and registered patent attorney at Axinn, Veltrop & Harkrider LLP. He has served as lead counsel to clients before the Patent Trial and Appeal Board, U.S. district courts, U.S. Court of Appeals for the Federal Circuit, and U.S. International Trade Commission.