Supreme Court Reverses and Vacates Federal Circuit in United States v. Arthrex, Inc.

On June 21, 2021, the U.S. Supreme Court reversed and vacated the Federal Circuit decision, dividing 5-4 on the judgment in United States v. Arthrex, Inc. In this majority opinion, the Supreme Court held that the unreviewable authority wielded by Administrative Patent Judges (APJs) during inter partes review is constitutionally incompatible with their appointment by the Secretary of Commerce to an inferior office. To read the opinion, please click here.

BACKGROUND

Three administrative patent judges (APJs) of the Patent Trial and Appeal Board (PTAB) held that claims in a patent owned by Arthrex were unpatentable. Arthrex then appealed to the U.S. Court of Appeals for the Federal Circuit and claimed that the appointment of the APJs was a violation of the Appointments Clause of the U.S. Constitution.

In October 2019, the Federal Circuit agreed, finding that APJs were unconstitutionally appointed to the PTAB under the Appointments Clause of Article II of the U.S. Constitution in Arthrex Case Nos. 19-1434, 19-1452, and 19-1458. The Federal Circuit determined that APJs are principal officers based on the application of a three-factor test that looks for the presence of unfettered review, supervision, and removal powers. To remedy the constitutional violation, the Federal Circuit removed federal employment protections available under Title 5, US Code and ordered the rehearing of each affected case before a new panel.

After consolidating three petitions for certiorari, the Supreme Court agreed to consider whether the PTAB’s structure is consistent with the Appointments Clause, and if it is not, what is the appropriate remedy. 

OPINION OF THE COURT

Justice Roberts delivered the opinion of the Court with respect to Parts I and II (Constitutionality), in which Justices Alito, Gorsuch, Kavanaugh, and Barrett joined. He wrote that the unreviewable authority wielded by APJs during inter partes review is incompatible with their appointment by the Secretary to an inferior office.

Justice Roberts wrote that “only an office properly appointed to a principal office may issue a final decision binding the Executive Branch in the proceeding before us.”

Justice Roberts also went on to address the appropriate remedy under Part III (in which Justices Alito, Kavanaugh, and Barrett joined), writing:   

35 U. S. C. § 6(c) is unenforceable as applied to the Director insofar as it prevents the Director from reviewing the decisions of the PTAB on his own. The Director may engage in such review and reach his own decision. When reviewing such a decision by the Director, a court must decide the case “conformably to the constitution, disregarding the law” placing restrictions on his review authority in violation of Article II. Marbury v. Madison, 1 Cranch 137, 178 (1803).

The Court explained that, because Congress has vested the Director with the powers and the duties of the PTO, the Director has the authority to provide for a means of reviewing PTAB decisions. In this case, an appropriate remedy is a remand to the Acting Director to decide whether to rehear the petition filed by Smith & Nephew. Additionally, the Court stated that Arthrex is not entitled to a hearing before a new panel of APJs.

CONCURRANCES AND DISSENTS

Justice Gorsuch filed an opinion concurring in part and dissenting in part, agreeing with the Court’s holding that the application of the statute violates the Constitution, but disagreeing with the Court’s remedy of giving the Director the power to review IPR decisions as a means of correction.

Additionally, Justice Breyer filed an opinion concurring in the judgment in part and dissenting in part (in which Justice Sotomayor and Justice Kagan joined), disagreeing with the Court’s constitutional determination, arguing the APJ appointments are consistent with the Constitution.  Justice Breyer went on to write that the Court’s remedy “addresses that specific problem, and for that reason I agree with its remedial holding.”

Justice Thomas filed a dissenting opinion (in which Justices Breyer, Sotomayor, and Kagan joined), finding that the APJs are inferior officers, and thus there is no constitutional violation in need of correction.

AIPLA filed an amicus brief in this case on December 2, 2020. To read the brief, please click here.