Arthrex, Inc. v. Smith & Nephew, Inc. - 941 F.3d 1320 (Fed. Cir. 2019)

Rule:

Administrative patent judges (APJs) are principal officers. The lack of any presidentially-appointed officer who can review, vacate, or correct decisions by the APJs combined with the limited removal power lead the court to conclude. that these are principal officers. While the Director does exercise oversight authority that guides the APJs procedurally and substantively, and even if he has the authority to de-designate an APJ from inter partes reviews, the control and supervision of the APJs is not sufficient to render them inferior officers. The lack of control over APJ decisions does not allow the President to ensure the laws are faithfully executed because he cannot oversee the faithfulness of the officers who execute them. These factors, considered together, confirm that APJs are principal officers under Title 35, U.S. Code as currently constituted. As such, they must be appointed by the President and confirmed by the Senate; because they are not, the current structure of the Board violates the Appointments Clause. 

Facts:

Arthrex, Inc. owns the '907 patent, which is directed to a knotless suture securing assembly. Smith & Nephew, Inc. and Arthrocare Corp. (collectively "Petitioners" or "Appellees") filed a petition requesting inter partes review of claims 1, 4, 8, 10-12, 16, 18, and 25-28 of the '907 patent. Inter partes review is a "'hybrid proceeding' with 'adjudicatory characteristics' similar to court proceedings." After a petitioner files a petition requesting that the Board consider the patentability of issued patent claims, the Director of the United States Patent and Trademark Office ("USPTO") determines whether to institute an inter partes review proceeding. A three-judge panel of Board members then conducts the instituted inter partes review. If an instituted review is not dismissed before the conclusion of the proceedings, the Board issues a final written decision determining the patentability of challenged claims. Once the time for appeal of the decision expires or any appeal has been terminated, the Director issues and publishes a certificate canceling any claim of the patent finally determined to be unpatentable. The inter partes review of the '907 patent was heard by a three-judge panel consisting of three administrative patent judges (APJs). The Board instituted review and after briefing and trial, the Board issued a final written decision finding the claims unpatentable as anticipated. 

Issue:

Did the appointment of the Board's APJs by the Secretary of Commerce, as currently set forth in Title 35, violate the Appointments Clause?

Answer:

Yes.

Conclusion:

The court held that this case was an exceptional one that warranted consideration despite the patent owner's failure to raise its Appointments Clause challenge before the Patent Trial and Appeal Board. APJs are principal officers under Title 35, U.S. Code as currently constituted. As such, they must be appointed by the President and confirmed by the Senate; because they are not, the current structure of the Board violated the Appointments Clause. The appropriate remedy to the constitutional violation was partial invalidation of the statutory limitations on the removal of APJs. The application of Title 5, U.S. Code's removal protections to APJs was unconstitutional and was severed. Because the decision in this case was made by a panel of APJs that were not constitutionally appointed at the time the decision was rendered, the court vacated and remanded.