Arthrex Case Ends with a Whimper

The Supreme Head-Fake

In U.S. v. Arthrex, Inc., the Supreme Court of the United States on June 21 decided a patent case thought to be one of the most significant IP cases to watch in 2021, because it threatened the very existence of the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office (“USPTO”).

The first paragraph of Justice Roberts' majority opinion ended with the sentence: "Billions of dollars can turn on a Board decision." Thus did the Court signal that it would act meaningfully to remedy an affirmed violation of the Appointments Clause of the U.S. Constitution resulting from the manner in which the USPTO appointed the PTAB's Administrative Patent Judges (“APJs”).

Alas, the signal proved a Supreme head-fake. As the linked New York Times article explains, the remedy the Court imposed will leave things pretty much business as usual at the PTAB.

Background

The PTAB is a “quasi-judicial body [that] operates at the direction of the USPTO [D]irector (who is also a member of the PTAB).” It decides invalidity challenges to patent claims, as well as appeals of USPTO examiners’ claim rejections in pending patent applications.

Arthrex argued that the USPTO’s hiring of the APJs violated the Appointments Clause. The Federal Circuit agreed, reasoning that the APJs should have been appointed by the President instead of the Secretary of Commerce. Many unsatisfied PTAB proceeding participants then appealed adverse judgments under Arthrex. In response, the Federal Circuit frequently reversed those judgments and remanded the cases to be heard before new PTAB judges. As of May 1, 2020, there were 103 such remands, all of which the PTAB stayed pending possible Supreme Court resolution.

Commentary on the Remedy - Where Do We Go from Here?

Instead of leaving the situation for Congress to fix (as Justice Gorsuch would have done), the Arthrex majority nullified only a section in the Patent Act (35 U.S.C. § 6(c)) "to the extent that its requirements prevent the Director from reviewing final decisions rendered by the APJs," and announced a remedy of bestowing upon the Director the power to review PTAB decisions.

In his concurring opinion, Justice Gorsuch opined that the remedy "ensur[es] that the people at least know who's responsible for supervising this process - the elected President and his designees." But he plainly acknowledged: "Still, I harbor no illusions that today's decision will resolve all the problems." Indeed, one strains when pondering what practical difference this will ultimately make in future proceedings. Since the hiring of the current APJs clearly violated the Appointments Clause, why shouldn't there be Congressional oversight to at least confirm that current and future APJs meet relevant qualifications?

In the words of an IPWatchdog article about this decision: "While the ultimate remedy is narrow, a number of questions have already been raised by the ruling, including what the broader implications may be for other government agencies that operate similarly to the USPTO; the practicality of USPTO Director review of potentially thousands of decisions; whether giving final say on these decisions to a political appointee is fair; and more."