Federal Government Seeks Cert on Appointments Clause & Forfeiture Issues
On June 25th, the federal government filed a petition (here) for certiorari asking the Supreme Court to review the CAFC’s decisions in both Arthrex, Inc. v. Smith & Nephew, Inc., No. 2018-2140 (Fed. Cir. Oct. 31, 2019) and Polaris Innovations Ltd. v. Kingston Tech. Co., Inc., No. 2018-1831 (Fed. Cir. Jan. 31, 2020). This petition comes as no surprise after the CAFC’s fractured denial of an en banc Arthrex rehearing.
The Court has had occasion to consider Appointments Clause issues several times in recent years, most notably in Lucia v. SEC (2018), and again touching upon the issue last week in Seila Law LLC v. CFPB.
Is there a SCOTUS appetite for the gov’t’s issues?
The gov’t’s petition presents two questions, discussed below.
1. Whether, for purposes of the Appointments Clause, U.S. Const. Art. II, § 2, Cl. 2, administrative patent judges of the U.S. Patent and Trademark Office are principal officers who must be appointed by the President with the Senate’s advice and consent, or “inferior Officers” whose appointment Congress has permissibly vested in a department head.
As it argued before the CAFC, the government maintains that APJs are inferior officer, relying heavily upon the Supreme Court’s holding in Edmond v. United States, 520 U.S. 651 (1997). According to the government, “the key inquiry is whether the officer’s ‘work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.’” Pet. at 17 (citing Edmond, 520 U.S. at 663). Further, “Edmond made clear that, in determining whether a particular officer is subject to the requisite degree of direction and supervision, a court should consider the cumulative effect of the supervisory mechanisms available to various superior officers.” Pet. at 18.
The government advances several reasons why the “cumulative effect” favors a finding that APJs are inferior officers: (1) the Secretary of Commerce and the USPTO Director possess the authority to appoint APJs and remove APJs (with respect to their judicial assignments); (2) the Director possesses the authority to establish binding agency policies through formal rule making and designating certain Board decisions precedential; and (3) the Director controls the conduct of individual proceedings through his statutory power to institute proceedings. Pet. at 18-22. Accordingly, the government would find that APJs are inferior officers subject to the direction and supervision of the Secretary and the Director.
The government also claims that the CAFC’s finding that APJs are principal officers gives too much weight to certain—admittedly probative—factors, such as “(1) whether an appointed official has the power to review and reverse the officers’ decision; (2) the level of supervision and oversight an appointed official has over the officers; and (3) the appointed official’s power to remove the officers.” Pet. at 22-23. While these factors are relevant, the CAFC improperly evaluated them in isolation, “rather than as complementary tools of supervision and direction.” Pet. at 23. For example, “the Secretary’s power to remove a judge from federal service under the generally applicable efficiency-of-the service standard, in conjunction with the Director’s power to prescribe the rules and policies judges must follow, enables those superiors to ensure that judges faithfully apply those rules and policies in cases before them.” Pet. at 26. That ability, along with previously discussed powers, establish that the Secretary and Director adequately direct and supervise APJs.
The Supreme Court may have previewed its thinking on this question last week in Seila Law LLC v. CFPB (here), the Court found that the CFPB’s structure—consisting of a single agency head not subject to unilateral Presidential removal—violated the separation of powers. While the question presented in Seila Law does not bear directly upon the issues at play in Arthrex and Polaris, the Court highlighted in a footnote certain factors relevant to the distinction between principal and inferior officers: “we have in the past examined factors such as the nature, scope, and duration of an officer’s duties. More recently, we have focused on whether the officer’s work is ‘directed and supervised’ by a principal officer.” Seila Law, slip op. at 15 n. 3 (citations omitted). Notably, the footnote does not mention removing officers or reviewing officers’ decisions as an aspect of supervision, which could be argued to undercut the Federal Circuit’s reliance upon those factors in Arthrex.
2. Whether the court of appeals erred by adjudicating an Appointments Clause challenge brought by a litigant that had not presented the challenge to the agency.
As to the second question presented, the government argues that the CAFC erred in not finding the Appointments Clause challenge forfeited. The government argues that Arthrex forfeited the Appointments Clause challenge because (1) the Court in Freytag v. Commissioner, 501 U.S. 868, 895 (1991) did not give “courts broad discretion to excuse administrative forfeitures whenever separation-of-powers issues are involved, and (2) raising constitutional challenges before an agency serve important purposes such as “developing a record that addresses antecedent issues and brings agency expertise to bear.” Pet. at 31-33.
The petition concludes with a plea that the Court consider Arthrex and Polaris so that it may address both the Appointments Clause and forfeiture issues if necessary. Pet. at 33-34. If the Court only granted review of Arthrex, it may not reach the Appointments Clause question if it reverses the forfeiture question, and if the Court only granted review of Polaris, it would not have the opportunity to address the forfeiture question presented by Arthrex.
Smith & Nephew filed its own cert petition (here), also asking the Supreme Court to reverse the Federal Circuit. In addition to raising many of the same issues as the government, Smith & Nephew explained that the Federal Circuit’s ruling has already been extended to apply to other types of PTO activity, such as ex parte and inter partes reexamination. And Arthrex also filed a cert petition, arguing to the Supreme Court that the Federal Circuit didn’t go far enough – the PTAB APJs remain unconstitutional, and this is a problem only Congress can fix.
Meanwhile, the PTAB continues to hold all Arthrex remands in abeyance. Stay tuned.