Jeffri A. Kaminski is a Partner with Venable LLP in its Washington, DC office.

On October 31, 2019, the Federal Circuit, in Arthrex, Inc. v. Smith & Nephew, Inc., No. 2018-2140, ruled that the current structure of the Patent & Trial Appeal Board (PTAB) violated the Appointments Clause of Article II of the U.S. Constitution. Rather than eliminate the PTAB as some feared (or hoped for), the Federal Circuit remedied this constitutional violation by divesting the more than 200 Administrative Patent Judges (APJs), who decide cases before the PTAB, from the protections of “the statutory removal provisions.” In doing so, the Federal Circuit reclassified the APJs as “inferior officers” who could be removed from their positions without cause by the Secretary of Commerce and the Director of the USPTO.

The Federal Circuit also vacated and remanded the Board’s decision without reaching the merits of the case, holding that a “new panel of APJs must be designated and a new hearing granted.” However, the Federal Circuit specifically limited this holding only to those cases where “final written decisions were issued and where litigants present an Appointment Clause challenge on appeal.” Thus, other PTAB decisions cannot be reviewed or vacated on this basis.

In Arthrex, Smith & Nephew, Inc. filed a petition to the PTAB requesting an inter partes review to challenge the patentability of certain claims of U.S. Patent No. 9,179,907, directed to a knotless suture securing assembly, which Arthrex owns. The PTAB issued a final written decision finding those specific claims of ʼ907 unpatentable. Arthrex appealed the PTAB’s decision to the Federal Circuit and raised the issue that APJs were not constitutionally appointed but were acting as principal officers, not “appointed by the President with the advice and consent of the Senate” as the Appointments Clause of the U.S. Constitution requires.

The Federal Circuit agreed with Arthrex because neither the Secretary of Commerce nor the Director—the only two presidentially-appointed officers that provide direction to the USPTO—“exercised sufficient direction and supervision over APJs to render them inferior officers.” Under the flawed structure, the Secretary of Commerce appoints the APJs to the PTAB. When a petitioner requests an inter partes review, the APJs then serve on a three-judge panel to consider the patentability of challenged claims and issue final written decisions determining the patentability of challenged claims “on behalf of the Executive Branch.” The Federal Circuit held that this significant exercise of authority along with the limitations on removal from service only for “such cause as will promote the efficiency of the service” gave the APJs status as principal officers instead of inferior officers.

Rather than eliminating the three-APJ panels or completely altering the method of appointing APJs, the Federal Circuit “partially severed” the APJs from the statutory provision that applies to other officers and employees of the USPTO—classifying APJs as “inferior officers” and subjecting them to at-will removal by the Director. The Federal Circuit thought this to be the “narrowest viable approach to remedying the violation of the Appointment Clause” and “the proper course of action and the action Congress would have undertaken.”

Now that APJs are “at-will” officers, the finality of their issued decisions is checked by the fact that the Director can dismiss them for any reason. It remains to be seen, however, if this will shape their day-to-day practices at the PTAB. Will the Director involve himself in the details of every appeal, which can be highly complex and technical, now that he can remove any APJ he disagrees with? Likely no. However, if a case is high-profile, could APJs feel compelled to rule a certain way to stay in the good graces of their Director who may have other objectives, whether political or policy-driven? Perhaps yes. Whether or not individual APJs may come and go, what is certain is that the PTAB still remains a legitimate administrative law body that will continue to review and cancel patent claims it deems unpatentable.