By: Caldwell

On October 31^st, 2019 the Court of Appeals for the Federal Circuit (“CAFC”) issued a decision in Arthrex Inc. v. Smith & Nephew Inc., 2019 WL 5616010, that, en route to vacating a Patent Trial and Appeal Board (“PTAB”) decision in an inter partes review (“IPR”), found unconstitutional the process for appointing the Administrative Patent Judges (“APJs”) who preside over IPRs.  The ramifications of Arthrex are unclear but potentially widespread – the decision at least calls into question the outcomes of many other IPRs and other post-grant validity challenges before PTAB.

An IPR is a procedure for challenging the validity of a United States patent before the United States Patent and Trademark Office (USPTO). APJs, CAFC held, were officers, due to their significant discretion, oversight, and their ability to issue final written decisions. Additionally, the CAFC held that the APJs were principal officers that must be nominated by the President and confirmed by the Senate under the Constitution, and therefore fell under the Appointment Clause, because of the lack of supervision and review. Since APJs are appointed by the Secretary of Commerce and not the President, this decision rendered all APJs unconstitutional.

The Appointments Clause reads:

“… and [the President] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.”

The CAFC developed a remedy for the constitutional problem. The CAFC eliminated the portion of the statute that provided APJs with certain employment protections, including striking out a statutory limitation of the Secretary’s ability to remove APJs. Thereby, the CAFC held that this change would render APJs inferior officers not principal officers and, therefore, would not require presidential appointment.  The CAFC remanded with an order that the PTAB decide the case again with a different panel of APJs.

An effect of the CAFC’s decision is that the losing party in a previously issued PTAB final written decision may seek, in or before its opening appeal brief, to have the decision vacated and decided again by a different PTAB panel. The decision lays the groundwork for many recent IPR decisions to be reheard.  On November 9, 2019, the CAFC ordered the parties in Polaris Innovations Lt. v. Kingston Technology Company, Inc. to provide supplemental briefing addressing the constitutional questions in the case, specifically the constitutionality of Administrative Patent Judges (“APJs”) in the PTAB. In the instant case, another panel of the CAFC is prepared to reconsider Arthrex to explore the constitutional implications of its decision.