Federal Circuit Rules that PTAB Judges are Unconstitutionally Appointed

In Arthrex, Inc. v. Smith & Nephew, Inc., Appeal No. 2018-2140 (Fed. Cir., Oct. 31, 2019), a three Judge Fed. Cir. panel of Moore, Reyna and Chen took a deep dive into the appointments clause of the constitution and held that PTAB judges (“ APJ’s”) are unconstitutionally appointed “principal officers” of the U.S., who cannot validly be appointed by the Director of the Commerce Department, in consultation with the PTO Director. While the PTAB is mostly made up of APJ’s, the Director, the Deputy Director, and the Commissioners  of Patents and of Trademarks are also considered to be members of the Board.

To limit the “solution to the problem” by severing as little of the Patent Act as possible, the panel ruled that it would be sufficient to sever the portion of the Patent Act restricting the removal of the APJ’s. Once removable without cause, the APJ’s are rendered “inferior officers”, who do not require presidential appointment and Senate confirmation. In this case a three-judge panel had carried out the IPR and issued a final written decision.

Interestingly, appellant Arthrex had not raised this issue at the Board, that had found the claims anticipated. However, the panel ruled that this was not a waiver, due to the importance of the scope of the Appointments Clause. Since unconstitutionally appointed APJ’s had decided the IPR, the panel vacated and remanded, ordering a new hearing to be held before a new Board. The panel wrote: “[w]e see the impact of this case as limited to those cases where final written decisions were issued and where litigants present an Appointments Clause challenge on appeal.”

I am not an expert on the fine procedural aspects of appeal to the Fed. Cir., but if a party had lost before the PTAB and is anywhere in the process of appealing to the Fed. Cir., it would appear that it could add an Appointments Clause challenge and the Fed. Cir. would then vacate and remand for reconsideration by a different PTAB panel. Since the substantive outcome could well be different, patentees in this posture will be able to bob for a second bite of the apple. Happy Halloween!

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