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Justices Float Multiple Fixes to Save Patent Judge Appointments

March 2, 2021, 7:02 AM

The Patent Trial and Appeal Board’s powers remain up in the air after a U.S. Supreme Court oral argument in a case testing the constitutionality of board appointments.

Several conservative justices seemed inclined to agree with a U.S. Court of Appeals for the Federal Circuit ruling that PTAB judges’ authority to void patents meant they should be principal officers—nominated by the president and confirmed by the Senate—rather than appointed by the Commerce secretary. But they signaled through their questioning that the Federal Circuit’s solution of severing certain job protections for the judges wasn’t enough to fix the constitutional problem.

The Federal Circuit’s remedy “wasn’t something that got a lot of credence from the court,” Matthew Rizzolo, a partner at Ropes & Gray LLP who listened to the argument, said.

If the high court rules PTAB judges are principal officers, the question becomes whether they will strike a different part of the statute to address the issue, or kick it to Congress to implement a fix.

The focus at argument Monday wasn’t that the judges serve at-will, but rather that they have the authority to invalidate patents without direct review by a presidentially appointed official. The justices suggested various ways to solve the problem without blowing up the board, which provides an administrative route for tech companies, drugmakers, and others to challenge patents they are accused of infringing.

PTAB Safe?

The fact that remedies came up at all signals the court may agree with Arthrex Inc. that the administrative patent judges are principal officers. The government and Smith & Nephew Plc, Arthrex’s opponent in the case, argued that the judges were inferior officers all along so there’s no constitutional problem.

“My initial impression is that they were extremely skeptical of the government’s position, and that they seem to be leaning towards the notion that APJs are principal officers,” Natalie Bennett, a partner at Morgan, Lewis & Bockius LLP in Washington, said.

But how the judges might carve up the statute to solve the problem is a harder question. “It was difficult for me to really glean where anyone is on that,” she said. “For practical reasons, you would hope that there is some sort of outcome that allows the PTAB to continue to function and we have an orderly system,” she said.

Even though the Supreme Court seemed to be leaning toward deciding the judges were unconstitutionally appointed, “it didn’t seem like any of the justices really foreshadowed that they want to completely upend the whole IPR process,” Cory Bell, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner LLP in Boston, said, referring to inter partes review, a system of challenging patents’ validity at the PTAB.

Potential Options

Justice Neil M. Gorsuch asked if severing the provision of the statute that says only the patent judges may grant rehearing would solve the problem by vesting final authority with the director.

Trying to insert the director above the board as a single decision-maker rather than three-judge panels “isn’t a surgical solution,” Jeffrey A. Lamken, arguing for Arthrex, said. “That’s vivisection.”

Justice Clarence Thomas suggested giving the director discretion that he or she could delegate to the patent judges as a way to make them inferior.

“That’s exactly how Congress fixed the problem for the Trademark Trial and Appeal Board,” Lamken said, referring to a change Congress recently tucked into an the omnibus spending bill that made TTAB decisions subject to review by the Patent and Trademark Office director.

Justice Amy Coney Barrett asked Smith & Nephew attorney Mark A. Perry how the court could choose when there are so many remedies available.

“I don’t mean to be flip—but, if you tell me how we lose, we can tell you what the remedy is,” he said. If the real problem is lack of agency reviewability, the most direct solution would be to allow the director to unilaterally order rehearing, he said.

“There may be other remedies depending on where, if anywhere, the court were to find a constitutional violation,” he said. “It is not where the Federal Circuit found it. And it’s certainly not where Arthrex has identified it, which is to take down this whole system.”

Back to Congress

Lamken and some of the justices argued that if the PTAB’s judges were unconstitutionally appointed, it’s up to Congress to come up with a fix.

But Bennett said waiting for a solution from Congress “would throw patent litigation into disarray.” If that happens, she predicts an increased emphasis on district court litigation, like before the IPR system was created.

“The patent system would still function even if you didn’t have the PTAB able to adjudicate IPRs,” she said.

Deputy Solicitor General Malcolm Stewart argued for the government. Mark A. Perry of Gibson Dunn & Crutcher LLP in Washington argued for Smith & Nephew. Jeffrey A. Lamken of MoloLamken LLP in Washington argued for Arthrex.

The case is United States v. Arthrex, Inc., U.S., No. 19-1434, argued 3/1/21.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

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