October 13, 2020 - Federal Circuit Insights

Supreme Court to Review Arthrex: Big Deal or Ho Hum?

Over the past several months, we’ve looked at what Federal Circuit cases the Supreme Court has and hasn’t reviewed, and how often the Supreme Court agrees with each Federal Circuit judge. Today, we got another data point with our first grant of a Federal Circuit case for the new Supreme Court term. The case is about the proper procedure for appointing administrative patent judges at the Patent Trial and Appeal Board.

That issue is one Federal Circuit watchers are very familiar with, and we’ve written about it several time times (see here, here, and here). As a short recap: last October in Arthrex, Inc. v. Smith & Nephew, Inc. the Federal Circuit held that the America Invents Act violated the Appointments Clause of the U.S. Constitution by giving the Secretary of Commerce, and not the President, authority to appoint the administrative patent judges who decide inter partes reviews. But the Federal Circuit blunted the effect of that holding by granting only a limited remedy—remand for a new hearing and a new decision from a new panel of judges—and by limiting who was entitled to that remedy—to only those who had received a final written decision from the Board before the Federal Circuit’s decision and had properly preserved an Appointments Clause challenge. The Federal Circuit has since extended Arthrex’s reach to other types of proceedings before the Patent Trial and Appeal Board while continuing to limit the remedy and the parties entitled to it.

The Supreme Court has now agreed to consider both parts of the Federal Circuit’s decision based on two questions presented (Supreme Court lingo for the issues it will consider in a case):

  1. Whether, for purposes of the Appointments Clause, U.S. Const. Art. II, § 2, Cl. 2, administrative patent judges of the U.S. Patent and Trademark Office are principal officers who must be appointed by the President with the Senate’s advice and consent, or “inferior Officers” whose appointment Congress has permissibly vested in a department head.
  1. Whether, if administrative patent judges are principal officers, the court of appeals properly cured any Appointments Clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. 7513(a) to those judges.

The Supreme Court’s decision to review the Federal Circuit’s decision shouldn’t come as a major surprise and probably shouldn’t be taken as indicating how the case will come out. Although the success rate for certiorari petitions is extremely low, cases in which a federal appellate court strikes down all or part of a federal statute are much more likely to attract the Justices’ attention. Add on the fact that the Federal Circuit has exclusive jurisdiction over patent cases (so there’s no opportunity for a circuit split or further development in other courts) and that the Solicitor General of the United States was one of the petitioners (the SG has a much better success rate than other litigants) and you have a recipe for a strong chance of Supreme Court review. (The SG also asked the Supreme Court to review whether parties needed to raise their constitutional challenge in the PTAB first, but the Court declined to review that question presented.)

Given the issues the Supreme Court has agreed to hear, the effect of the Court’s eventual decision on patent law could be relatively ho hum or far reaching. If the Court reverses the Federal Circuit on the first question, finding no Appointments Clause violation at all, it will largely be business as usual for Patent Office proceedings. The PTAB will continue to oversee and decide the same cases it does today, albeit the administrative patent judges would once again be protected under the Administrative Procedure Act from at-will removals. Cases remanded under Arthrex might be redecided by a new PTAB panel or perhaps could be returned to the original panel, which could reinstate its original Final Written Decision. If the latter, the Federal Circuit might end up getting back a bunch of cases that Arthrex had effectively taken off its docket.

If instead the Supreme Court affirms the Federal Circuit on both issues, the result would also probably be business as usual. The window for Arthrex-affected decisions given the Federal Circuit’s limited remedy is largely closed at this point, with most affected cases already remanded to the Patent Office (which has effectively stayed them) or stayed at the Federal Circuit by agreement of the parties. Those case would proceed but likely no new cases (or very few new cases) would be affected.

The most interesting bucket would be if the Supreme Court agrees with the Federal Circuit that there was an Appointments Clause violation but disagrees on the remedy. At the Federal Circuit, the patent owners argued that only Congress can fix the statute, which could mean an end to many AIA-created Patent Office proceedings until Congress adopts a fix (or the President, with advice and consent of the Senate, appoints PTAB judges). If the Supreme Court agrees, that could affect far more cases than Arthrex has depending on whether parties preserved an Appointments Clause challenge (although normal rules of finality would likely prevent reopening past cases). Of course, the Supreme Court could adopt a completely different remedy altogether, which might have a broad or narrow reach based on what the Court’s decision says.

Arthrex likely will be argued in early 2021, and it should be decided by July 2021.