The United State Supreme Court recently granted three petitions for certiorari that challenged the Federal Circuit’s ruling that administrative law judges on the Patent Trial and Appeal Board (PTAB) are appointed in violation of the Appointments Clause of Article II of the US Constitution.
The Appointments Clause provides that “principal officers” in the US federal government must be appointed by the President with the advice and consent of the Senate. Inferior officers may be appointed by the head of a department.
Administrative Patent Judges (APJs) are appointed by the Secretary of Commerce in consultation with the Director of the US Patent and Trademark Office (USPTO).
In the case of Arthrex v. Smith & Nephew, a patent owner who lost at the PTAB level successfully contended before the Federal Circuit that the appointment of the APJs was unconstitutional.
Applying the test set forth in Edmond v. United States, the Federal Circuit considered:
The court noted that
These factors are strong indicators of the level of control and supervision appointed officials have over the officers and their decision-making on behalf of the Executive Branch. The extent of direction or control in that relationship is the central consideration, as opposed to just the relative rank of the officers, because the ultimate concern is "preserv[ing] political accountability."
The only two presidentially-appointed officers that provide direction to the USPTO are the Secretary of Commerce and the Director. Neither of those officers individually nor combined exercises sufficient direction and supervision over APJs to render them inferior officers.
Because the Federal Circuit found that APJs were “principal officers,” it concluded that their appointments by the Secretary of Commerce violated the Appointments Clause.
As the National Review notes, the Supreme Court’s decision on this issue could have “sweeping implications”:
As of November 2019, the PTAB had held over 10,000 trials in post-grant proceedings, and since the Federal Circuit denied rehearing, the fate of those trials lies with the Supreme Court. Further, in the year since the Federal Circuit issued its decision, more than 100 cases have been remanded to the PTAB for rehearing based on Arthrex, and all of those cases have been stayed pending the outcome at the high Court. The implications may even extend beyond the patent world, given that the PTO appoints judges to the Trademark Trial and Appeal Board (TTAB) in the same way PTAB judges are appointed (though Congress is considering a bipartisan resolution to the Appointments Clause issue for TTAB judges in The Trademark Modernization Act of 2020, H.R. 6196).
If the Supreme Court decides that the PTAB judges were appointed unconstitutionally, then ALL those 10,000 decisions by the PTAB to date could be open to challenge – leading to chaos in the patent law system.
Oral arguments before the high court – including newly-appointed Justice Amy Barrett, who has little patent law experience -- are scheduled for early 2021.