On June 21, 2021, the United States Supreme Court affirmed the Court of Appeals for the Federal Circuit’s (Federal Circuit) determination that the America Invents Act’s statutory scheme allowing issued patents to be challenged through inter partes reviews (IPRs) within the United States Patent and Trademark Office (“USPTO”) violated the Appointments Clause of the Constitution, Art. II, §2, cl. 2. United States v. Arthrex, Inc., Nos. 19-1434, -1452, and -1458. The Supreme Court remedied this constitutional violation by providing the Director of the USPTO (Director) the discretionary right to review IPR final written decisions.
Consequently, IPRs have now survived another constitutional challenge. IPRs remain a significant alternative to Federal Court litigation attacks on the validity of an issued U.S. patent, albeit now with the possibility of direct review by the Director. The USPTO is expected soon to issue guidance on how and when to seek Director review of an adverse IPR decision and how to deal with the backlog of IPR decisions held in abeyance awaiting the Supreme Court’s Arthrex decision.
As an alternative to litigation in federal courts, the America Invents Act created new ways to challenge issued patents within the USPTO. Administrative Patent Judges (APJs) of the Patent Trial and Appeal Board (PTAB), an executive tribunal within the USPTO, were authorized to oversee and decide those challenges through IPRs. The APJs were given the authority to issue final written decisions on patentability. 35 U.S.C. §6(c) expressly prevented the Director from reviewing IPR decisions. The secretary of commerce appointed the APJs.
On appeal from an IPR proceeding, the Federal Circuit held that an APJ’s substantial authority, with essentially no oversight, made her a principal officer under the Constitution. However, Article II’s Appointments Clause requires the president to appoint principal officers, with the advice and consent of the Senate and not appointment by a cabinet secretary such as the secretary of commerce. Thus, the America Invents Act’s IPR scheme violated the Constitution. Rather than strike down the entire IPR procedure, the Federal Circuit severed the portion of the Act that provided tenure protections for APJs and limited when they could be removed from office. This converted them into inferior officers who could properly be appointed by the secretary of commerce.
In Arthrex, a 5-4 majority opinion by Chief Justice Roberts, the Supreme Court agreed that an APJ’s authorized powers were more than those permitted by inferior officers. Consequently, they were properly principal officers and their appointment violated the Constitution. The Court found the necessary direction and supervision over APJs in IPRs lacking because APJs had the power to render a final decision on behalf of the United States as to the validity of patents: “without any such review by their nominal superior or any other principal officer in the Executive Branch…the buck stops with the APJs, not with the Secretary or Director.”
The Supreme Court, however, disagreed with the Federal Circuit as to how to remedy this constitutional violation. Instead of focusing on restrictions on an APJ’s removal from office and changing the circumstances when that could occur, the Supreme Court preserved IPRs by focusing on the lack of direct review of APJ decisions and providing review of APJ final IPR decisions by the Director. The constitutional violation was the restraint on the review authority of the Director imposed by 35 U.S.C. §6(c). Although the Court split 5-4 on whether APJs were principal officers, the justices voted 7-2 to remedy any constitutional defect by giving the Director the power to review IPR decisions.