IP Law Daily Lawmakers explore legislative fix to ensure constitutionality of PTAB judge appointments
Wednesday, November 20, 2019

Lawmakers explore legislative fix to ensure constitutionality of PTAB judge appointments

By Cheryl Beise, J.D.

House panel holds hearing to address issues raised in Federal Circuit’s Arthrex decision.

The House Judiciary Committee’s Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on November 19 to address constitutional issues associated with the current legal structure of the Patent Trial and Appeal Board. Representative Hank Johnson (D-Ga.), chairman of the subcommittee, convened the hearing—entitled "Patent Trial and Appeal Board and the Appointments Clause: Implications of Recent Court Decisions"—specifically to address the Federal Circuit’s October 31 decision in Arthrex v. Smith & Nephew, Inc., in which the court held that administrative patent judges (APJs), who comprise the PTAB, were appointed to their positions in violation of the Constitution’s Appointments Clause.

Recognizing that "the Arthrex court was in a difficult position with limited options after identifying a constitutional defect," Chairman Johnson said that he felt that it was crucial to hold a hearing on this topic immediately. "We need to learn more about the impact of this decision on existing cases, and the likelihood of the decision being upheld or modified by either the en banc Federal Circuit or the Supreme Court. And most importantly, we need to begin to consider whether Congress must get involved to provide a sensible solution," Johnson said.

House Judiciary Committee Chairman Jerry Nadler (D-N.Y.) appeared at the hearing to express his view that removing APJ’s civil service protections was not an acceptable remedy to the constitutional appointment problem. "It may be that, under the Constitution, the Director must be entitled to have a level of review or influence over any case finally decided by PTAB," Chairman Nadler said. "But it is not clear that this is the best way of allowing that sort of review to happen."

Rep. Johnson agreed that in passing the America Invents Act, Congress did not intent adjudicatory body to have judges who have no job security.

The subcommittee heard from four witnesses: (1) John F. Duffy, Samuel H. McCoy II Professor of Law, University of Virginia School of Law; (2) Robert A. Armitage, Consultant, IP Strategy & Policy; (3) John M. Whealan, Intellectual Property Advisory Board Associate Dean for Intellectual Property Law Studies, George Washington Law School; and (4) Arti K. Rai, Elvin R. Latty Professor of Law and Faculty Director, The Center for Innovation Policy, Duke University School of Law.

Arthrex decision. In Arthrex, the Federal Circuit held that the Patent Act’s scheme for appointing APJs to serve on Patent Trial and Appeal Board panels violates the Appointments Clause of Article II of the U.S. Constitution because the Act makes the APJs "principal officers" of the United States, requiring appointment by the President rather than the Secretary of Commerce. To cure the violation, the Federal Circuit held that severing the portion of the Patent Act restricting removal of the APJs is sufficient to render the APJs "inferior officers" and remedy the constitutional appointment problem. The position of the PTO was all APJs have tenure protection under 5 U.S.C. § 7513.

"It is our view that Congress intended for the inter partes review system to function to review issued patents and that it would have preferred a Board whose members are removable at will rather than no Board at all," the court said. The court accordingly interpreted the removal provisions in Title 5 as not applying to APJs. Because the Board decision in the case under appeal was made by a panel of APJs that were not constitutionally appointed at the time the decision was rendered, the decision was vacated and the case remanded for reassignment to a new PTAB panel. The Federal Circuit limited the impact of its decision "to those cases where final written decisions were issued and where litigants present an Appointments Clause challenge on appeal."

Remedy. While the witnesses all agreed with the Federal Circuit’s assessment of the constitutional problem with appointment of APJs, none of them wholly concurred with the remedy adopted in Arthrex to make APJs "inferior officers."

Arti Rai opined that the Federal Circuit’s remedy was constitutional, but inadvisable. Rai believes that the "cleanest path forward is therefore surgical Congressional intervention that gives the Director a unilateral right of review (including, potentially, a right that applies retroactively). This approach would cure any perceived constitutional infirmity without subjecting APJs to political pressure that isn’t transparent." She added that the right of review should be discretionary in order to avoid overburdening the Director.

According to John Duffy, any effective solution must not vest in inferior officers a decisional responsibility that is final and not subject to any review by Senate-confirmed officers. Duffy outlined three possible solutions to achieve this goal: (1) make APJs appointed by the President, with the consent of the Senate; (2) make PTAB decisions reviewable by the USPTO Director; or (3) make PTAB decisions reviewable by a special PTAB panel composed of officers appointed by the President with the consent of the Senate.

Robert Armitage suggested that Congress consider dividing the PTAB into two separate Boards—a Patent Appeal Board staffed with administrative appeal judges to hear ex parte appeals and a Patent Trial Board staffed with administrative trial judges to hear contested cases. The Patent Appeal Board’s judges could be appointed by the Secretary of Commerce, in consultation with the USPTO Director.

John Whealan—who previously served in the USPTO’s Solicitor’s Office, including three years as Associate Solicitor—suggested that it was time for Congress to review the entire IPR regime. Whealan said that it was not anticipated when the AIA was enacted that 14,000 IPR cases would be filed every year, injecting uncertainty into the patent process. He noted that 80% of the time some claims of the patents subject to review are found invalid.

The witnesses predicted that the Arthrex decision could be taken up by the en banc Federal Circuit or the Supreme Court. While this hearing may be the first step in rethinking the AIA’s structure for establishing PTAB judges, it certainly will not be the last.

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