Fed. Cir. finds APJ’s overseeing IPRs to be unconstitutionally appointed, but suggests remedy

Arthrex, Inc. v. Smith & Nephew (USPTO as Intervenor)

Docket Nos. 2018-2140 (IPR2017-00275)
October 31, 2019

Brief Summary: Board IPR FWD vacated and remanded as APJs are “principal officers” that must be appointed by the President (as opposed to the Secretary of Commerce), suggesting that “severing the portion of the Patent Act restricting removal of the APJs is sufficient” to remedy the issue.

Summary: Arthrex appealed Board IPR decision finding the claims of its US 9,179,907 unpatentable as anticipated. The merits of that decision was not reached in this opinion. Instead, the opinion is focused on whether the Administrative Law Judges (ALJs) overseeing the IPR were properly appointed under the Appointments Clause of the U.S. Constitution. It is noted that Arthrex did not raise this issue during the IPR and the USPTO argued the argument was therefore waived. The FC panel, however, determined this case to “one of the ‘rare cases in which we should exercise our discretion to hear petitioners’ challenge to the constitutional authority” (Freytag, US 1991; Cascades Projection, FC 2017 (“like Freytag, this case implicates the important structural interests and separation of powers concerns protected by the Appointments Clause”)). The FC panel determined that the ALJs are “principal officers” that must be appointed “by the President as opposed to the Secretary of Commerce”, concluding 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.” Since the final written decision (FWD) “on appeal issues while there was an Appointments Clause violation,” the FC panel vacated and remanded the decision. Reasoning supporting this decision includes the fact that IPR “is a ‘hybrid proceeding’ with ‘adjudicatory characteristics’ similar to court proceedings” (Saint Regis, FC 2018; Oil States, US 2018 (“[t]he government itself has recognized” this); “APJs exercise significant discretion when carrying out their function of deciding” IPRs; no “appointed official has the power to review and reverse the” APJs decision, “appointed official has very little oversight” over APJs, and an appointed official does not have the power to remove an APJ (the remedy suggested by this FC panel). Thus, this decision was vacated and remanded (“a new panel of APJs must be designated and a new hearing granted”, although it may proceed “on the existing written record”). This opinion also states that the FC panel “see[s] the impact of this case as limited to those cases where [FWDs] were issued and where litigants present an Appointments Clause challenge on appeal.”

In separate orders (Customedia Technologies, LLC v. Dish Network Corp., et al., Docket No. 2019-1000, CBM2017-0032; Customedia Technologies, LLC v. Dish Network Corp., et al., Docket No. 2019-1001-3, -1027, -1029, CBM2017-00019, IPR2017-00717, IPR2017-00724), FC panels rejected Customedia attempts to have the Board decision in those cases removed based on the Arthrex decision, concluding that Customedia had “forfeited its Appointments Clause challenges” by “not rais[ing] any semblance of” such a “challenge in its opening briefs or…in a motion filed prior to its opening briefs” (SmithKline, FC 2006).

This entry was posted in Appeal, Covered Business Method Reviews, Inter Parties Review (IPR), IPR, Uncategorized. Bookmark the permalink.

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