Constitutional Law Scholars Weigh in on Arthrex

“The court recognized that there is a fine line between severing part of a statute in a way that preserves congressional intent and rewriting the statute. It can be debated whether the court ended up on the right side of the line in this case, but ultimately the court’s approach is not unusual.” – Evan Zoldan, Professor of Law at the University of Toledo College of Law Arthrex v. Smith & Nephew decision caused considerable confusion and excitement among the patent bar last week, partly because the issue decided by the Federal Circuit was a constitutional, and not a patent one. While we await next steps from the parties and the USPTO, IPWatchdog spoke to several constitutional law experts to get their take on the significance of the decision and the likelihood that the Supreme Court would be interested in the issue if appealed. All agreed that the Federal Circuit’s reasoning was correct, though one thought the Court’s approach to deciding that administrative patent judges (APJs) are inferior officers was slightly “unusual” in its focus strictly on the issue of “supervision” over other factors that the Supreme Court has found to be relevant to the distinction between inferior and principal officers.

Key Cases

For background, these are the key cases cited in the Federal Circuit’s ruling and their primary holdings with respect to the issue at hand:

  • Buckley v. Valeo, 424 U.S. 1, 125–26 (1976) – “An ‘Officer of the United States,’ as opposed to a mere employee, is someone who ‘exercis[es] significant authority pursuant to the laws of the United States.’” 
  • Morrison v. Olson, 487 U.S. 654 (1988) – “the Court concluded that the Independent Counsel was an inferior officer because he was subject to removal by the Attorney General, performed limited duties, had limited jurisdiction, and had a limited tenure.”
  • Freytag v. Commissioner of Internal Revenue, 501 U.S. 868,878–79 (1991) –“The Supreme Court exercised its discretion to decide an Appointments Clause challenge despite petitioners’ failure to raise a timely objection at trial. 501 U.S. at 878–79. In fact, the Court reached the issue despite the fact that it had not been raised until the appellate stage. The Court explained that the structural and political roots of the separation of powers concept are embedded in the Appointments Clause. It concluded that the case was one of the ‘rare cases in which we should exercise our discretion to hear petitioners’ challenge to the constitutional authority.’” 
  • Edmond v. United States, 520 U.S. 651 (1997) – “‘Whether one is an ‘inferior’ officer depends on whether he has a superior,’ and ‘inferior officers’ are 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.’”
  • In re DBC 545 F.3d 1373, 1380 (Fed. Cir. 2008) – “In DBC, the Appointments Clause challenge was to the particular APJs who were appointed by the Director, rather than the Secretary. We observed that if the issue had been raised before the agency, the agency could have ‘corrected the constitutional infirmity.’ At that time, there were APJs who had been appointed by the Secretary who could have decided the case and thus the agency could have cured the constitutional defect.”
  • Lucia v. SEC — S. Ct. —, 2018 WL 3057895 (U.S., June 21, 2018) –“When a judge has heard the case and issued a decision on the merits, ‘[h]e cannot be expected to consider the matter as though he had not adjudicated it before. To cure the constitutional error, another ALJ. . . must hold the new hearing.’”

IPWatchdog posed three questions to the experts based on some of the issues that have been raised since Arthrex.

Q: Was the Federal Circuit’s analysis and its severability solution appropriate?

John M. Greabe, Director, Warren B. Rudman Center for Justice, Leadership & Public Service, Professor of Law, University of New Hampshire Franklin Pierce School of Law
In fashioning a remedy, the Court tried to structure things to minimize the impact of the decision; whenever there’s a structural constitutional issue like this the key questions include impact on other pending cases and retroactive effect. This is especially seen in the criminal context, with respect to the constitutionality of criminal convictions, for example. In this civil case, it seems to me the court appropriately minimized those effects. The decision is consistent with other cases that have dealt with this issue; it’s certainly a plausible line of analysis.

Evan Zoldan, Professor of Law at the University of Toledo College of Law
It’s a bit unusual in its approach, but not outside the range of reasonable. The Supreme Court has held that there are a number of factors that can be used to determine if officers are inferior or principal, including whether they have a superior, the scope of their duties, the scope of their jurisdiction, and the duration of their position. The Federal Circuit in this decision focused exclusively on the first factor, whether the officer has a superior. There’s nothing terribly unusual about focusing on this factor, but it was more unusual for the court to dispense with the other factors in only a few short sentences. Instead, I would have expected the court to give two facts more weight: that Administrative Patent Judges are not in a policymaking role and that they only hear claims related to patent law as opposed to a broader set of subject matters. Both of these facts weigh in favor of finding that the judges are inferior officers, but the court didn’t consider those factors thoroughly.

With respect to the issue of severability, ultimately it is a question of statutory interpretation whether a court can sever part of a statutory scheme from the rest without invalidating the whole statute. The court recognized that there is a fine line between severing part of a statute in a way that preserves congressional intent and rewriting the statute. It can be debated whether the court ended up on the right side of the line in this case, but ultimately the court’s approach is not unusual.

Lee J. Strang, John W. Stoepler Professor of Law & Values, University of Toledo College of Law
I’m not surprised by this decision; it’s been the trend over the past 30 years or so for the Supreme Court to more rigorously enforce structural limits on administrative agencies, and one of the favorite strategies for doing that has been via Appointments Clause cases. We’ll see more of this going forward. I thought the Federal Circuit’s analysis was well done here; it broke down what counts as supervision of inferior officers very thoroughly. I don’t see the focus on the supervision factor as strange because the Edmond case said that the Morrison v. Olson factors are not the key to the distinction between inferior and principal officers; rather, they are meant to distinguish between employees and officers.

Q: Is the Supreme Court likely to take up the case if appealed?

John M. Greabe
The underlying reality is that this is something the Supreme Court has become more interested in; a majority of its members has repeatedly signaled a concern that the democratically accountable branches exercise greater control over the administrative state. I’m not sure if this specific case is one they would take up, but these are issues the Court is clearly interested in.

Evan Zoldan
The lead case on distinguishing between inferior and principal officers is Morrison, and there has been a lot of debate about whether it’s still good law, because subsequent cases have questioned its reasoning without expressly overruling it. If the Supreme Court did take the case, it would be to clarify that uncertainty.

Lee Strang
I could certainly see the Supreme Court taking an interest in this case.

Interpreting the Legislative History

Some have pointed to the legislative history of the America Invents Act to suggest that Congress explicitly rejected a severability amendment, calling into question the Federal Circuit’s quick fix solution of simply severing the application of Title 5 of the U.S. Code to APJs. In particular, commenters have noted an exchange involving Representative Watt in which he proposed an amendment on behalf of Representative Waters on severability. According to the legislative history, Watt said:

This is a straightforward amendment that provides that if one part of the bill is determined to be unconstitutional, it can be severable from the rest of the bill and it doesn’t bring the rest of the provisions down. That’s a standard policy to put in most legislation.

However, Watt later withdrew the amendment when he learned he had been “mistaken” about Waters’ desire to offer the amendment. The amendment was consequently withdrawn. IPWatchdog asked the scholars whether they thought this would have any weight, but they were largely unimpressed.

Q: Does the fact that the amendment on severability was explicitly withdrawn suggest that Congress did not intend for the statute to be severable?

John Greabe
My reaction is that that is an overreading of the legislative history. In general, it is unsound to infer from the fact that an amendment was proposed and not adopted that Congress explicitly was opposed to the merits of the amendment. Amendments are proposed and fail all the time, for all sorts of reasons having nothing to do with the merits of what they seek. And so, this is far too thin a reed to anchor a conclusion that Congress wanted the whole Act to disappear if a part of it were to be held unconstitutional. Far better to infer, unless the text or adoption history makes it unmistakably clear otherwise, that Congress would expect the court to engage in the severability analysis that it engaged in.

Evan Zoldan
Evidence of a failed amendment to a statute is very weak evidence of meaning. Courts rarely consider this type of evidence when interpreting statutes. I would consider it of slight, if any, predictive value.

Lee J. Strang
Legislative history is generally viewed as less valuable today than it once was, particularly with respect to something so short and offhand as this exchange.

Open Questions and Pending Cases

A remaining open question is whether the APJs themselves may have a cause of action. Most commentators have said it’s unlikely they could act on their own and that they would probably have to appeal via the Department of Justice, which will no doubt get involved at some point anyway. If an en banc petition is filed, which is probable, the APJs could file an amicus brief individually or collectively.

Separately, in Polaris v. Kingston, oral arguments held on November 4 delved further into the issues raised by Arthrex, with Polaris suggesting “that the court’s correction of the statute that was implemented in Arthrex is insufficient and recommended the nuclear option — invalidate the statute; then let Congress fix it,” according to Bill Vobach of 717 Madison Place.

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Join the Discussion

4 comments so far.

  • [Avatar for Jonathan R Stroud]
    Jonathan R Stroud
    December 19, 2019 09:23 am

    This is insightful, good content. Well done.

  • [Avatar for Anon]
    November 7, 2019 06:36 am

    Second paragraph, “this” => “thus”

  • [Avatar for Steve]
    November 7, 2019 06:25 am

    The bottomline: the USPTO/PTAB should recognize that the CAFC is the higher authority and they must comply with that protocol. They have thankfully acknowledged that recently with Phillips being the new way and BRI is gone.

  • [Avatar for Anon]
    November 6, 2019 06:49 pm

    I would have put the severability question in a bit of a different light (given my expressed views on the Watt exchange as well as the more vociferous exchange (apparently incomplete on the record) regarding the original placement of a specific severability clause in the Manager’s Amendment.

    The Watt exchange is so unbelievably weak as to raise my own suspicions as it being genuine or merely dust-kicking for what may be the more pertinent (and earlier) exchange.

    I think that the answers here (tied to the Watt exchange) this come across far too weak for the genuine question of the AIA being deemed severable or not. Those who would elevate “not severable” to requiring an express clause are off the mark (for reasons already given).