Featured / Opinions

While the Federal Circuit did not issue any opinions this morning, this afternoon (after the time the court typically issues opinions) it issued an important precedential opinion in a patent case, Arthrex, Inc. v. Smith & Nephew, Inc. In this case Arthrex argued that the the Secretary of Commerce’s appointment of Administrative Patent Judges to the Patent Trial and Appeal Board violates the Appointments Clause of the U.S. Constitution. The Federal Circuit agreed. The court, however, also noted the limited nature of its holding and the limited remedy its holding required.

In short, the Federal Circuit found that the appointment of the Patent Trial and Appeal Board’s Administrative Patent Judges by the Secretary of Commerce violates the Appointments Clause of the U.S. Constitution because “APJs are principal officers” and “[a]s such . . . must be appointed by the President and confirmed by the Senate.”

Given this finding of a constitutional violation, the court vacated and remanded the Board’s decision without reaching the merits of the underlying dispute over the Board’s action invalidating particular patent claims.

Importantly, however, the court noted that “[a]ppointments Clause challenges are ‘nonjurisdictional structural constitutional objections’ that can be waived when not presented.” As a result, the court indicated that “the impact of this case” would be “limited to those cases where final written decisions were issued and where litigants present an Appointments Clause challenge on appeal.”

As for the remedy in this case, the court also noted the limited impact of its holding. It noted that while “a new panel of APJs must be designated to hear the inter partes review anew on remand,” “on remand the decision to institute is not suspect” because “the statute clearly bestows such authority on the Director.” Moreover, it emphasized that it would see “no error in the new panel proceeding on the existing written record” but left it “to the Board’s sound discretion whether it should allow additional briefing or reopen the record in any individual case.”

Here is the introduction to the opinion, which summarizes the court’s holding and remedy:

Arthrex, Inc. appeals from the final written decision of the Patent Trial and Appeal Board holding claims 1, 4, 8, 10–12, 16, 18, and 25–28 of U.S. Patent No. 9,179,907 unpatentable as anticipated. Arthrex appeals this decision and contends that the appointment of the Board’s Administrative Patent Judges (“APJs”) by the Secretary of Commerce, as currently set forth in Title 35, violates the Appointments Clause, U.S. Const., art. II, § 2, cl. 2. We agree and conclude that the statute as currently constructed makes the APJs principal officers. To remedy the violation, we follow the approach set forth by the Supreme Court in Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477 (2010) and followed by the D.C. Circuit in Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board, 684 F.3d 1332 (2012). As the Supreme Court instructs, “‘[g]enerally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem,’ severing any ‘problematic portions while leaving the remainder intact.’” Free Enterprise Fund, 561 U.S. at 508 (quoting Ayotte v. Planned Parenthood of Northern New Eng., 546 U.S. 320, 328–29 (2006)). We conclude 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. As the final written decision on appeal issued while there was an Appointments Clause violation, we vacate and remand. Following Lucia v. S.E.C., 138 S. Ct. 2044 (2018), the appropriate course of action is for this case to be remanded to a new panel of APJs to which Arthrex is entitled.