An inter partes review (IPR) is an administrative proceeding conducted by the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office (USPTO) to review the patentability of one or more claims in a patent under the concepts of novelty and obviousness. They are overseen by Administrative Patent Judges (“APJs”) appointed by the Secretary of Commerce, in consultation with the Director of the USPTO.
Ever since its adoption as part of the America Invents Act in 2012, IPRs have been a popular tool for those seeking to invalidate competitors’ patents. Notably, IPRs are seen as a cheaper alternative to resolving disputes in federal court and more likely to produce results in favor of the patent challenger. For example, since its institution in September 2012 through June 2020, only 20% of patents survive completely intact when the proceeding reaches a Final Written Decision. Nearly two-thirds of all instituted petitions lead to all the corresponding patent claims invalidated through the IPR.
In a shocking decision last Halloween, the Federal Circuit held in Arthrex, Inc. v. Smith & Nephew, Inc. that Administrative Patent Judges (“APJs”) appointed by the USPTO as set forth by Title 35 of the U.S. Code regarding patent law violated the Appointments Clause of the Constitution (Art. II, § 2, Cl. 2). The Appointments Clause provides The President with the ability to nominate and appoint various “Officers of the United States,” e.g., ambassadors, ministers, judges, and other officers. Such officers may be principle officers, requiring appointment by the President, or inferior officers, “whose work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.” While no specific criterion exists for delineating between principle officers and inferior officers, the difference ultimately lies within an officer’s power and control over in exercising their rights and responsibilities.
The Federal Circuit concluded that APJs as currently appointed are principle officers due, in part, to the rights and responsibilities provided to them by Title 35 to issue final decisions on behalf of the United States without any review by a presidentially-appointed officer who can vacate or correct such decisions. Moreover, the statute is silent on the removal of APJs, thus restricting removal power by the Secretary of Commerce or the Director of the USPTO. The Federal Circuit further concluded that severing the restriction on removal of APJs would make them inferior officers, thereby remedying the constitutional flaw. The case stems from one of Arthrex’s patents being rendered unpatentable by a three-judge panel of three APJs in an inter partes review.
Nearly a year after Arthrex, the Supreme Court has granted petitions for writ of certiorari to review the Federal Circuit’s decision. Specifically, the Supreme Court will determine:
(1) Whether, for purposes of the Constitution’s appointments clause, administrative patent judges of the U.S. Patent and Trademark Office are principal officers who must be appointed by the president with the Senate’s advice and consent, or “inferior Officers” whose appointment Congress has permissibly vested in a department head; and
(2) whether, if administrative patent judges are principal officers, the court of appeals properly cured any appointments clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. § 7513(a) to those judges.
Given the reputation for the PTAB as a “patent death squad,” more patent challenges have been initiated through IPRs with patent litigation filing rates declining. The Supreme Court’s decision on Arthrex will have sweeping consequences on the validity and administration of IPRs and could potentially move patent disputes back to federal courts. A decision is expected by mid-2021.
Please reach out to us for further questions or for any of your IPR or patent litigation support needs.
1 USPTO Trial Statistics, Jun 2020, https://www.uspto.gov/sites/default/files/documents/Trial_Statistics_20200630_.pdf
2 Edmond v. United States, 520 U.S. 651, 662-63 (1997).
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