Supreme Court Tackles Legality of Patent Review Board Judges

The U.S. Supreme Court will consider the constitutionality of administrative judges that review the validity of issued patents, seeking to clarify a lower court decision that critics say has caused “havoc and confusion.”

The high court agreed to review whether judges with the Patent Trial and Appeal Board were unconstitutionally appointed with too much authority. An appeals court found that PTAB judges had such power over patents that they should be nominated by the president and confirmed by the Senate or, alternatively, be allowed to be fired without cause.

Created by Congress in 2011 as a faster and cheaper alternative to litigation in federal courts, PTAB’s power to invalidate patents has long been controversial. Patent owners and critics have called it a “death squad” for the high rate of patents being canceled, and have launched a barrage of legal challenges to the board.

The ruling by the Federal Circuit, the nation’s top patent court, resulted in a mishmash of orders in which some board decisions were sent back while others remained in place. Patent owners have tried to have challenges dismissed and other judges have questioned the panel’s decision.

The decision has caused “havoc and confusion, resulting in over 100 otherwise unassailable final written decisions by the PTAB being summarily vacated and remanded to be reheard unnecessarily, the wasting of valuable party and court resources,” Askeladden LLC wrote in a brief supporting the Supreme Court taking the case. Askeladden is a group set up to address patent issues by the Clearing House, a payments company owned by the biggest U.S. banks.

The federal government contends that the roughly 260 administrative patent judges are constitutional as they are appointed by the Commerce secretary and must operate under rules set by the director of the U.S. Patent and Trademark Office, both Senate-confirmed positions.

“The court of appeals has unwound the significant efforts of the agency and the litigants in the administrative proceedings -- often spanning a year or longer -- to determine the patentability of the challenged claims,” the Solicitor General’s Office wrote in the government’s Supreme Court petition.

The original case involved an Arthrex Inc. surgical device patent that was invalidated by PTAB after a challenge by Smith & Nephew Plc. Both Smith & Nephew and the Trump administration argue that the judges are what’s known as “inferior officers” that don’t have to be appointed by the president. Arthrex argues they are “principal officers,” but that the Federal Circuit’s remedy didn’t fix the illegality of the appointments.

In addition to the government’s petition, Arthrex and Smith & Nephew each filed their own petitions. There are dozens more before the court that could be affected by its findings.

Other companies and organizations urged the Supreme Court to review the issues.

Comcast Corp., which is embroiled in a royalty battle with Xperi Holding Corp.’s TiVo, said invalidity rulings it won at the agency were sent back by the Federal Circuit even though TiVo never raised the constitutionality issue. TiVo, in its own filing urging review, said removing the job protections of the judges makes them ineligible to preside over any cases under the Administrative Procedures Act.

PTAB is popular with companies like Apple Inc. and Google Inc. looking to invalidate patents that are part of lawsuits against them.

The drug industry has a love-hate relationship with PTAB. Drugmakers have feared that the board would strip their blockbuster medicines of legal protection, while Gilead Sciences Inc. turned to the agency in an unsuccessful effort to invalidate government patents on a way to prevent HIV.

The lead case is U.S. v Arthrex, 19-1434

--With assistance from Ian Lopez.

To contact the reporter on this story:
Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story:
Jon Morgan at jmorgan97@bloomberg.net

Elizabeth Wasserman, Anthony Lin

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