By Travis Baxter, Maginot Moore & Beck LLP
United States v. Arthrex was recently argued at the Supreme Court in a case that may have significant implications in the Patent Trial and Appeal Board (PTAB). Arthrex Inc. owns U.S. Patent No. 9,179,907 (the ‘907 patent), which is directed to a knotless suture securing assembly. Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320, 1325-26 (Fed. Cir. 2019). The ‘907 patent was challenged in an inter partes review (IPR) proceeding by Smith & Nephew, Inc. and Arthrocare Corp., and a panel of three Administrative Patent Judges (APJs) of the PTAB issued a final written decision finding a number of claims of the ‘907 patent unpatentable as anticipated. Id.
Arthrex appealed to the Federal Circuit, alleging that the APJs are principal officers and must therefore be appointed according the Appointments Clause. Id. at 1327-28. Since the APJs are not appointed according to the Appointments Clause, according to Arthrex, they do not have the authority to remove a property right by invalidating claims of issued patents. Id. A three-judge panel of the Federal Circuit agreed with the first part of Arthrex’s argument, holding that the structure of the PTAB violates the Appointments Clause. Id. at 1329-35. However, rather than declaring the PTAB entirely unconstitutional, the Federal Circuit severed certain statutory removal protections of the APJs, thereby rendering them inferior officers and correcting the constitutionality of the PTAB. Id. at 1335-38. The result left none of the parties satisfied, and after rehearing was denied, Arthrex, Smith & Nephew and the United States, as intervenor, all appealed to the Supreme Court.
The arguments largely rest on administrative and constitutional law, which I won’t delve into in this blog post. The decision, however, could impact patent practitioners and their clients, since it might invalidate currently-pending and previously decided post-grant review cases.
In the arguments before the Supreme Court, the court appeared to suggest three potential outcomes. The first potential outcome is that the Supreme Court decides that the APJs are inferior officers, for which presidential appointment and Senate confirmation is not required. This is the simplest outcome and results in the current PTAB being upheld without change. The court seemed to, on one hand, prefer this solution as the easiest one, but on the other hand, be concerned that this result would set a precedent allowing Congress to delegate too much authority to inferior officers in executive agencies outside the United States Patent and Trademark Office.
The second potential outcome is that the Supreme Court decides that the PTAB runs afoul of the Appointments Clause as currently constituted but that the problem can be fixed. The court generally seemed hostile to the changes made by the Federal Circuit, so it will be interesting to see which route they go if this is the chosen path. One solution that was brought up in the oral argument was to require presidential appointment, with advice and consent of the Senate, of the APJs. This could cause some delay in the PTAB while the APJs are appointed. Another possible solution to remedy the Appointments Clause issue is that the court grants the director of the PTO the power to review and overturn PTAB decisions, or at the very least grant rehearing of PTAB decisions. In this case, the court’s blue-penciling of the statute is unlikely to have major implications for the typical post-grant review going forward, since it would probably be extremely rare for the Director to exercise the newly granted powers. Nonetheless, if the court’s decision determines that the PTAB is unconstitutional, past PTAB decisions and currently pending cases could be retroactively unconstitutional as well.
This brings us to the final possibility, which is probably the least likely but most disruptive outcome from a patent practitioner’s view. In this decision, the court sides with Arthrex and decides that the PTAB violates the Appointments Clause and cannot be fixed. The statutory configuration of the PTAB can therefore only be remedied by Congressional action. In the meantime, the PTAB would not have the authority to adjudicate post-grant review of issued patents (interestingly, Arthrex conceded that there is no constitutional issue with APJs adjudicating direct appeals from the denial of patent applications, though there have been Federal Circuit decisions that have raises this issue since the Arthrex Federal Circuit opinion). If the court takes this approach, currently pending post-grant review cases would likely be stopped and could potentially need to be re-filed once the Constitutional issue is remedied. One can hope that even in this polarized political climate, both sides of the aisle can come together in Congress to produce a quick solution to fix the PTAB, but expect there to be a backlog of cases while Congress takes the time to act on the issue. Moreover, it is possible that accused infringers may lose the ability to file or re-file IPRs in cases in which the one-year time bar under 35 U.S.C. § 315(b) elapses (or has already elapsed) before the post-grant review system can be fixed.
Ultimately, although the issues in the Arthrex case are generally outside the scope of patent law, the outcome could significantly affect some of your clients’ interests. Keep an eye out for this decision when it’s released later this year.
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