Federal Circuit Entertains Arguments on Whether PTAB Judges Were Constitutionally Appointed

In the oral argument of Arthrex v. Smith & Nephew on October 1, 2019, a panel of Judges Moore, Chen, and Reyna expressed significant interest in an argument addressing whether PTAB judges were constitutionally appointed. Similar issues are scheduled for an oral hearing before the CAFC in the November 4th oral argument of Polaris v. Kingston.

You can listen to the hour long oral argument of Arthrex v. Smith & Nephew here: [Link].

Judge Chen was the first member of the panel to express an interest in the constitutionality issue during the oral argument. You can hear that questioning and an explanation of the constitutionality challenge here:

As I understand it, the argument being asserted is that PTAB judges are authorized by the AIA to issue final written decisions in IPR’s (and other proceedings) and therefore need to be “Principal Officers.” Principal officers are required to be appointed by the President and confirmed by the Senate. Since PTAB judges have not been confirmed by the Senate, they have not been appointed as Principal Officers in conformance with the Constitution. Therefore, their rulings lack authority under the Constitution.

Under the case law, one factor that is important in determining whether PTAB judges are principal vs. inferior officers is whether the Director has the power to supervise their judgments. Judge Reyna expressed some skepticism as to how the Director can exercise supervisory authority over the Board if the Director also serves as a member of the Board:

Judge Reyna also asked whether the Board has the authority to rule on whether its authority is constitutional:

Melissa Patterson appeared for the government and did an excellent job. She works for the DOJ rather than the USPTO. You might recall she had the unenviable task of trying to defend the DOJ’s “Magic Microscope” test in an earlier appearance before the court.

One of the issues at play in this case is whether the constitutionality challenge was waived/forfeited by appellants. Judge Moore noted the importance of the issue and how it could infect every PTAB proceeding going forward, if not addressed by the court:

The DOJ argued that the same issue is preserved in the Polaris v. Kingston case (2018-1831) to be argued on November 4th. Therefore, the argument goes, it would be OK for the panel in Arthrex to deem the issue waived and to kick the can down the road for the Polaris panel to consider. I’m not sure why the government would not want the Arthrex panel to consider the issue, however, if the government is so certain that the issue will inevitably be considered in Polaris. What difference should it make to the government which panel (Arthrex or Polaris) considers the issue? After all, the CAFC is a highly uniform decision-making body.

Judge Chen asked whether APJ’s, as opposed to Examiners, are required to follow the Director’s examination guidelines on topics such as §§101, 112, and 103. The government argued that APJ’s are required to do so. Judge Chen stated that he was not sure whether the APJ’s believe they are bound by the Director’s guidelines.

Judge Moore asked where does the Director obtain authority to remove APJ’s from a panel. Judge Moore also asked whether panel stacking would create a due process problem and cited Justice Ginsburg’s comments as well as Judge Dyk’s comments with respect to panel stacking.

The government also argued that if an APJ disregarded the binding policy directions of the Director in issuing a decision that it could be considered insubordination and grounds for removal.

With respect to the Director’s authority to review a panel’s decision, the government acknowledged that the Director does not have the authority to grant rehearing; but, he does have the authority to ask the Board to rehear the case.

The panel explored how the statutory language could be modified by the court to remove any Appointments Clause problems — apparently under the severability doctrine. I was under the impression that the AIA does not have a severability clause.

As one option, the government proposed an alarming alteration to the AIA language that would permit a single APJ to handle an IPR rather than a panel comprised of at least three APJ’s. Judge Moore expressed her concern about that proposal in much the same way that I think the patent bar would voice its concern, if allowed to comment.

Finally, Judge Moore noted that the government has argued so vociferously in previous cases how analogous PTAB proceedings are to district court proceedings, that it is difficult for the government to now argue that Congress would be content with the Director doing everything single-handedly (or via one of his “minions”).

On October 15, 2019, the Federal Circuit requested further briefing on the constitutionality challenge. The court wrote:

Should the Court conclude that there was an Appointments Clause violation, based on a conclusion that PTAB Judges are principal officers that are not properly appointed, but that a portion of the Patent Act may be severed and excised to cure the constitutional infirmity, should the case then be vacated and remanded for a new hearing before the Board pursuant to Lucia v. SEC, 138 S. Ct. 2044 (2018)?

That order is available here:

The government requested an extension of time that would have made its brief due a week after the oral hearing that is currently scheduled for Polaris v. Kingston. However, the court has denied that extension request.

The court did, however, request that the government expand upon another severability doctrine issue:

[P]lease explain the government’s proposal on page 35 of its brief: “Alternatively, this Court could hold that 35 U.S.C. § 3(c)’s provision that USPTO officers and employees are subject to Title 5 cannot constitutionally be applied to Board members with respect to that Title’s removal restrictions, and thus must be severed to that extent.”

That second order is available here:

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