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Are Patent Judges Unconstitutional? The Arthrex Case Explained

Jan. 5, 2021, 10:57 AM

From tech giants like Alphabet Inc.'s Google and Apple Inc., to pharmaceutical giants like Canada’s Apotex Inc., industry titans facing infringement lawsuits turn to the Patent and Trademark Office’s Patent Trial and Appeal Board to invalidate their rivals’ intellectual property.

But in Arthrex Inc. v. Smith & Nephew Inc., the U.S. Court of Appeals for the Federal Circuit found a flaw in that process that has upended dozens of patent fights: the constitutionality of how the tribunal’s judges are appointed.

Now, the U.S. Supreme Court is poised to determine whether the Federal Circuit’s fix, which has left the validity of major global companies’ intellectual property in limbo, actually solved the PTAB’s problem. Oral argument is scheduled for March 1.

1. What is the PTAB?

Comprised of over 200 patent judges who are technical experts, the board weighs previous inventions and legal requirements to decide whether an invention is actually patentable. Companies can try invalidating patents they’re sued for infringing in federal court, but the PTAB is seen by many as a speedier, cheaper alternative.

The PTO operates under the Department of Commerce, with the secretary appointing patent judges. But in Arthrex, the Federal Circuit said the 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 court severed from the Patent Act removal protections for judges, making it easier to fire them. That, in the Federal Circuit’s view, rendered the judges inferior officers appointable by the Commerce chief under the Constitution.

2. Why does this case matter?

The Federal Circuit has vacated dozens of PTAB decisions on appeal since Arthrex, demanding the patent board redo proceedings with new panels of now constitutionally appointed judges. The board is holding off on rehearing those decisions until the Supreme Court chimes in, leaving the fate of numerous patents up in the air.

If the Supreme Court decides that PTAB judges are principal officers, it will then decide if the Federal Circuit’s severing of removal protections cured the constitutional defect. That would open the door for the high court to wade into the law that created the PTAB’s popular inter partes reviews, one of its procedures for considering patent validity.

Alarmed at that possibility, special interest groups and frequent PTAB filers such as Apple and Intel Corp. have urged the high court to proceed with caution.

The PTO stands by its position that the judges are inferior officers, and that its director already wields sufficient control over them.

3. Why is the PTAB a target of constitutional challenges?

The PTAB has acquired a reputation as a patent killer that favors tech giants sued for infringement at the expense of patent owners and inventors. That has made it a target for some patent owners and their counsel, who have tried to weaken it by attacking its structure as unconstitutional.

For example, in another case at the Federal Circuit, New Vision Gaming v. SG Gaming Inc., New Vision is arguing that a board process for reviewing patents violates the Constitution’s right to due process because such reviews generate revenue, creating an incentive for the board to proceed with a review rather than dismiss a request.

The Supreme Court, too, has previously grappled with PTAB constitutionality. In one prominent case, Oil States v. Greene’s Energy, it came down on the board’s side, shooting down arguments that IPRs violate Article III of the Constitution establishing the federal government’s judicial branch and the Seventh Amendment right to a jury trial.

4. What would an Arthrex fix look like?

An Arthrex solution could take any number of forms.

One possibility would be giving the PTO director—who is nominated by the president and confirmed by Senate—the discretion to review PTAB decisions. Another would be to require that the PTAB’s chief judge be confirmed by the Senate and sign off on decisions.

Attorneys, meanwhile, say Congress may be best-positioned to fix the constitutional issue. But there has been little movement since Rep. Hank Johnson (D-Ga.), the chairman of the House Judiciary Courts, Intellectual Property, and the Internet Subcommittee, said in 2019 during a hearing on Arthrex that Congress should consider a remedy.

To Learn More:

—From Bloomberg Law

Cut Down Patent Reviews for Congress to Fix, Arthrex Tells Court

Apple, Intel Urge High Court to Save Patent Tribunal Challenges

Pharma Group, Academics Weigh in on PTAB Judge High Court Fight

Arthrex Points to Supreme Court Case in Bid to Shield Patent

Patent Office Braces Ahead of High Court Ruling on Agency Judges

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

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

To contact the editors responsible for this story: Melissa B. Robinson at mrobinson@bloomberglaw.com, Keith Perine at kperine@bloomberglaw.com; Jo-el J. Meyer at jmeyer@bloomberglaw.com

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