5-4 Opinion Offers Judicial Workaround by Giving More Oversight to the USPTO Director
In U.S. v. Arthrex, case number 19-1434; Smith & Nephew v. Arthrex, case number 19-1452; and Arthrex v. Smith & Nephew, case number 19-1458, the Supreme Court of the United States recently held that Patent Trial and Appeal Board (PTAB) judges are unconstitutionally appointed. But, the Court also held that providing the Director of the United States Patent and Trademark Office (USPTO) with more oversight over PTAB rulings will remedy the unconstitutionality of the PTAB judges.
It was a very divided opinion as the Justices split 5-4 on constitutionality, and disagreed on remedy across four different opinions and dissents. However, Chief Justice Roberts, joined by Justices Alito, Kavanaugh, and Barrett, issued the Opinion of the Court and ultimately concluded that PTAB rulings cannot constitutionally be enforced to the extent that its requirements prevent the USPTO Director from reviewing the final decisions rendered by APJs. However, the Court also held this problem can be solved if the Director can review final PTAB decisions and, upon review, issue decisions himself on behalf of the PTAB.
Per the Court, the key question across the three cases was whether the authority of Administrative Patent Judges (APJs) at the PTAB to issue decisions on behalf of the Executive Branch is consistent with the Appointments Clause of the Constitution. APJs conduct adversarial proceedings for challenging the validity of an existing patent before the PTAB. During such proceedings, the PTAB sits in panels of at least three APJs. The Secretary of Commerce appoints all APJs at the PTAB, except for the Director, who is nominated by the President and confirmed by the Senate.
Thus, the issue is whether these APJs were principal officers who must be appointed by the President with the advice and consent of the Senate, and whether their appointment by the Secretary of Commerce was therefore unconstitutional. The Federal Circuit previously held that the APJs were principal officers whose appointments were unconstitutional because neither the Secretary nor Director can review their decisions or remove them at will. To remedy this constitutional violation, the Federal Circuit invalidated the APJs’ tenure protections, making them removable at will by the Secretary.
The Court concluded that the unreviewable authority wielded by APJs during inter partes review is incompatible with their appointment by the Secretary of Commerce to an inferior office. The Appointments Clause provides that only the President, with the advice and consent of the Senate, can appoint principal officers. An inferior officer must be “directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.”
However, the Court found such review by a superior executive officer is absent for the PTAB and APJs. The Court reasoned that while the Director has tools of administrative oversight, neither he nor any other superior executive officer can directly review decisions by APJs. Only the PTAB itself may grant rehearings. This restriction on review relieves the Director of responsibility for the final decisions rendered by APJs under his charge. And, the possibility of an appeal to the Federal Circuit does not provide the necessary supervision.
Thus, the Court found APJs exercise executive power, and the President must be ultimately responsible for their actions. However, the Court also found that because of the insulation of PTAB decisions from any executive review, the President can neither oversee the PTAB himself nor attribute the PTAB’s failings to those whom he can oversee. APJs accordingly exercise power that conflicts with the design of the Appointments Clause. However, the Court also specifically noted that in reaching this conclusion, it does not attempt to set forth an exclusive criterion for distinguishing between principal and inferior officers for Appointments Clause purposes.
The Court then turned to the appropriate way to resolve the issue given the violation of the Appointments Clause. The Court concluded that the appropriate remedy is a remand to the Director for him to decide whether to rehear the petitions. The Court reasoned that although the APJs’ appointment by the Secretary allowed them to lawfully adjudicate the petition in the first instance, they lacked the power under the Constitution to finally resolve the matter within the Executive Branch. Under these circumstances, a limited remand to the Director provides an adequate opportunity for review by a principal officer.
The Court also noted that the Director need not review every decision of the PTAB. What matters is that the Director has the discretion to review decisions rendered by APJs. In this way, the President remains responsible for the exercise of executive power—and through him, the exercise of executive power remains accountable to the people.
As to the other Justices, Justice Gorsuch partly dissented, agreeing that APJs were unconstitutional, but saying the question of how to fix this appointment problem belonged to Congress and not at the Court. Justice Thomas wrote a full dissent saying the APJs were properly appointed under the Constitution, and therefore there was no need for any remedy. And, finally, Justices Breyer, Sotomayor and Kagan partially joined Justice Thomas, agreeing there is no constitutional issue with the appointment of the APJs, but also saying that if there had to be a remedy, the Court’s opinion was sufficient.