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Yesterday the Supreme Court granted the petitions for certiorari in three related Arthrex cases: (1) United States v. Arthrex, Inc. (19-1434), (2) Smith & Nephew, Inc. v. Arthrex, Inc. (19-1452), and (3) Arthrex, Inc. v. Smith & Nephew, Inc. (19-1458). The Court decided to consolidate the cases for briefing and oral argument and announced that all future filings and activity will be reflected on docket of No. 19-1434. The Court’s widely anticipated review will determine the fate of Administrative Patent Judges (APJs) under the Appointments Clause. Here are the details.

The Supreme Court has limited its review to the first two questions presented by the United States in its Memorandum:

  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.”
  2. “Whether, if administrative patent judges are principal officers, the court of appeals properly cured any Appointments Clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. 7513(a) to those judges.”

Notably, the Court denied review of the third question presented which asked: “Whether the court of appeals in Arthrex erred by adjudicating an Appointments Clause challenge that had not been presented to the agency.”

In October 2019, the Federal Circuit ruled that the appointment scheme for APJs is unconstitutional under the Appointments Clause. The court found the APJs to be principal officers due primarily to the restrictions on their removal and their ability to render final decisions on behalf of the executive branch that are not reviewable by the Director of U.S. Patent and Trademark Office (USPTO). As a remedy, the court eliminated the removal restrictions as applied to APJs, rendering them inferior officers. Later, the Federal Circuit denied en banc review and the government, Arthrex, and Smith & Nephew each decided to take the dispute to the Supreme Court in separate petitions for writ of certiorari.

In their petitions, the United States and Smith & Nephew both argue that the Federal Circuit erred in holding that the Appointments Clause was violated. Each contends that the APJs are inferior officers rather than principal and thus, that the appointment scheme for the APJs is constitutional.

Arthrex, on the other hand, agrees with the Federal Circuit in its petition that APJs are principal officers and that their appointment is unconstitutional. However, Arthrex asserts that review by the Supreme Court is necessary because

[t]he court, however, did not leave it to Congress to fix the problem—for example, by providing for APJs to be appointed by the President and confirmed by the Senate. Instead, it eliminated the tenure protections that shield APJs from politics and improper influence. That remedy not only contravenes congressional intent, but fails to cure the Appointments Clause violation. . . . By making APJs removable for policy reasons, political reasons, or no reason at all, the court eliminated a key safeguard Congress has traditionally deemed essential to make adjudicative processes fair. The court’s remedy, moreover, was no remedy at all. Even without tenure protections, APJs are still principal officers because they still have the power to issue final decisions on behalf of the agency without any possibility of review by a principal officer. They are thus still appointed in a manner that violates the Appointments Clause.

We will continue to monitor this case and report on developments.