CAFC Provides Last Word in PTAB Appointments Clause Debate

Given the remands that have been flowing back to the Patent Trial & Appeal Board (PTAB) from the Federal Circuit over the past few weeks, the writing has been on the wall as to en banc rehearing in Arthrex v. Smith & Nephew Inc.  The Court officially denied rehearing today.  Still, the 62 pages of differing viewpoints offered by the Court in its denial of rehearing essentially presented the Court’s collective reasoning anyway.

The per curiam opinion explained the earlier decision in the context of the dissenting views. That is, as between striking down the AIA and severing Title 5 protections for administrative patent judges, Congress was more likely to favor the latter.

As succinctly stated in the per curiam opinion (here),

If Congress prefers an alternate solution to that adopted by this court, it is free to legislate, and in the meantime, the Board’s APJs are constitutionally appointed and inter partes reviews may proceed according to Congress’ initial intent. .  .  . ¶ Nothing in the Arthrex decision prevents Congress from legislating to provide an alternative fix to the Appointments Clause issue. Congress can reinstate title 5 removal protections for APJs while ensuring that the inter partes review system complies with the Appointments Clause, if it so chooses.

The dissents split as to whether there was an Appointments Clause issue at all (Hughes, Wallach), or whether the title 5 severance was more “draconian” than a stay of all PTAB matters pending a Congressional fix. The latter was the dissent authored by Judge Dyk, who reasoned:

I conclude that even if the panel were correct that the present structure of IPR proceedings violates the Appointments Clause, the draconian remedy chosen by the panel—invalidation of the Title 5 removal protections for APJs—rewrites the statute contrary to Congressional intent. . . .¶ By eliminating Title 5 removal protections for APJs, the panel is performing major surgery to the statute that Congress could not possibly have foreseen or intended. .       .   .¶ To be sure, I do not suggest that the inappropriateness of the Title 5 invalidation should lead to invalidation of the entire AIA statutory scheme. What I do suggest is that Congress almost certainly would prefer the opportunity to itself fix any Appointments Clause problem before imposing the panel’s drastic remedy.

Supreme Court precedent and circuit authority support a temporary stay to allow Congress to implement a legislative fix in the Appointments Clause context.

In suggesting a statutory fix, Judge Dyk pointed to the preliminary hearing of the House Judiciary Committee on point, which suggested simply providing a Director review mechanism. While this would be the ideal solution, a stay pending Congressional action, or implementation of an untested agency solution (also suggested in this dissent) would seem to be far more disruptive—especially given the current focus of legislators on the global pandemic.

As pointed out in a footnote of the per curiam opinion, the Appointments Clause issue will impact, at most, 81 cases:

We have thus far vacated and remanded 37 appeals which properly preserved the Appointments Clause challenge by raising it before or in their opening brief. There are 44 Board decisions rendered prior to our curative decision (October 31, 2019) where a notice of appeal has been filed by the patent owner, but no opening brief as of yet, or where an opening brief has been filed and does raise an Appointments Clause challenge. Thus, the universe of cases which could be vacated and remanded (if every one of these appellants requests remand) is 81.

It is possible there are some stragglers tied up in PTAB rehearing, but still probably less than 90 cases in total.  I would expect most, if not all, such cases to take advantage of the Arthrex hearing “reset.”  Yet, it seems unlikely that there will be any significant change in outcomes across these cases. The narrative that some PTAB judges are somehow out to get patentees is baseless.

Perhaps, the PTAB Appointments Clause dispute moves on to the SCOTUS.  But on the heels of the Lucia v. SEC (2018) decision (SCOTUS deciding a very similar dispute), and with some indication that Congressional action is being contemplated, such a cert petition may not be the most compelling.  Unless and until a Congressional fix is provided, we may have heard the last word on Arthrex.