In a 5 - 4 decision, the US Supreme Court today ruled that the statute governing the authority of the administrative patent judges (APJs) of the Patent Trial and Appeal Board (PTAB) violated the US constitution. The apex court also provided a remedy for the violation.
The decision stemmed from a patent dispute between Arthrex and Smith & Nephew that resulted in the invalidation of Arthrex’s patent after an inter partes review (IPR) at the PTAB. Arthrex appealed to the Federal Circuit, challenging the constitutionality of the APJs. In 2019, the Federal Circuit agreed with Arthrex’s arguments that the APJs acted as principal officers and thus their appointments were unconstitutional. The Federal Circuit decided to remedy the violation by removing their tenure protections and ordering another IPR hearing before a new panel of APJs.
Arthex, the US Government and Smith & Nephew appealed to the US Supreme Court. Arthrex asked the court to declare the IPR regime unconstitutional as well as order a rehearing before a new panel of APJs.
The apex court’s view was that the APJs were inferior officers and therefore the statute governing their appointment was unconstitutional. Delivering the opinion of a divided court, Chief Justice Roberts noted: “Only an officer properly appointed to a principal office may issue a final decision binding the Executive Branch.”
The majority, however, agreed that the effective remedy for the violation is to give the USPTO Director the discretionary power over the decisions of the APJs. Roberts CJ said: “In sum, we hold that 35 U. S. C. §6(c) is unenforceable as applied to the Director insofar as it prevents the Director from reviewing the decisions of the PTAB on his own. The Director may engage in such review and reach his own decision. When reviewing such a decision by the Director, a court must decide the case “conformably to the constitution, disregarding the law” placing restrictions on his review authority in violation of Article II.”
The court overturned the Federal Circuit’s decision, set aside the PTAB’s decision and sent Smith & Nephew’s IPR petition back to the Acting USPTO Director to decide whether to order a rehearing or not. They rejected Arthrex’s argument to declare the IPR regime unconstitutional.
The judges were clearly divided in this difficult case which addresses both constitutional law and administrative law. Some would say the majority did not provide a clear answer on whether APJs are inferior or principal officers and whether the appointment process is compatible with the constitution.
In their respective dissenting opinions, Justices Gorsuch, Breyer and Thomas criticised the majority’s approach to the problem, arguing that the court should be mindful of the doctrine of separation of powers. Thomas J’s dissenting opinion is particularly notable.
There is also a concern about judicial independence. Constitutional law expert Steve Vladeck tweeted: “[T]his opens the door to the exercise of far more political control over administrative law judges in the Executive Branch—trading the value of quasi-independent adjudications for the principle of a "unitary" executive.”
The patent community will welcome the news that the apex court found a quick fix rather than strike down the PTAB’s judicial system, as some feared. It remains to be seen how the USPTO Director will exercise this common law power.
Read Managing IP's summary of the decision here and the views of in-house counsel and patent litigators here.
For Arthrex: Carlson Gaskey & Olds, Blank Rome and MoloLamken
For Smith & Nephew: Wolf Greenfield & Sacks and Gibson Dunn & Crutcher
Listen to the oral argument here. Read Arthrex’s arguments here and Smith & Nephew’s arguments here.
Read the court’s opinion here.