By Cecily Capo
In the recent case of United States v. Arthrex Inc., the US Supreme Court held in a 5-4 decision that the appointment of administrative patent judges as “principle officers” by the Secretary of Commerce violates the Appointments Clause of the United States Constitution.
Before this ruling, administrative patent judges, or APJs, sat on the Patent Trial and Appeals Board (PTAB) by appointment of the US Secretary of Commerce, and not by the President directly, to preside over adversarial proceedings, called an inter partes review.
Essentially challenges to the validity of a granted US patent, inter partes reviews are akin to trials and consist of the PTAB re-examining an issued US patent and rendering an opinion as to whether the patent is valid or not, in some cases stripping patent owners of their rights. A common misconception is that once a patent is obtained, the inventor or assignee is free from challenges, but as shown in Arthrex, patents are constantly under review and capable of being invalidated.
In 2015, Arthrex—a global medical device company—received a US patent for a device that reattached soft tissue, known as the ’907 patent. Arthrex later accused competitors—Smith & Nephew, Inc. and ArthroCare Corp.—of infringing the ’907 patent. In response, and as is their right, the accused infringers commenced an inter partes review of the ’907 patent. As a result, the APJs of the PTAB were called upon to decide whether Arthrex’s patent claims were invalid.
The PTAB ruled that the ’907 was invalid. Arthrex appealed that decision to the US Circuit Court for the Federal Circuit, arguing—among other issues—that the APJs were not appropriately appointed under the Appointments Clause in the US Constitution. The Appointments Clause gives the President the authority to “nominate and … appoint Officers of the United States,” including, for instance, Ambassadors and Justices of the Supreme Court.
It was Arthrex’s view that APJs must be appointed by the President, and that this exclusive authority could not be delegated to the Secretary of Commerce. The Federal Circuit held in favor of Arthrex, ruling that the appointment of APJs was indeed unconstitutional under the Appointments Clause of the Constitution.
The Federal Circuit reasoned that APJs are considered “principle officers” and, therefore, could only be appointed by the President. The portion of the Patent Act that restricted the removal of APJs was stricken by the court. The Supreme Court then granted certiorari and Chief Justice John Roberts issued the majority opinion for the Court. The majority held that the United States Patent and Trade Office’s Director has the “ultimate authority” to review the final outcome of an inter partes review of a patent, not the APJs. The Court relied on Edmond v. United States to justify their decision, which stated that inferior officers—i.e., the APJs—must be subject to some sort of supervision by an officer appointed by the President and confirmed by the Senate, i.e., the USPTO Director. It is a violation of the US Constitution to impose restrictions on the Director and allow the APJs to issue decisions without the Director’s supervision.
Additionally, since Congress has given the power and duties of the Patent and Trade Office to the Director in §3(a)(1), it follows that the Director has the authority to review PTAB decisions. The majority reiterated that the Director does not have to review every PTAB decision, but the Director must have the ability to as needed. Justice Breyer issued a concurring opinion, joined by justices Sotomayor and Kagan, approving of the remedy but disagreeing with the overall holding.
In short, this ruling implements an additional step for patentability disputes requiring that the APJ’s decisions are reviewed by the USPTO Director before the decision can then be appealed to the Federal Circuit.
Since the Arthrex ruling, various commentators and scholars have argued that this ruling could either have a chilling effect or further incentivize parties to file for an inter partes review of a granted US patent. Some posit that it may become part of an anti-competitive strategy to simply challenge the validity of the patent because of the amount of time it will take to receive a final decision, which may thereby reduce the overall lifespan of the challenged patent.
On the other hand, this additional step in the appellate review process may benefit patentees because it will significantly increase the amount of time and costs associated with challenging a patent, and these factors may force challengers to reconsider whether such a strategy is prudent.
 IP Watchdog, “Industry Reacts to the Supreme Court’s Arthrex Ruling: Chaos Averted – or Just Delayed?” (June 21, 2021).