“Does 9.13% of PTAB trials qualify as rarely? Most would probably find that to be more often than rarely, and a concerning number that requires further investigation to determine the specific reason as to why more than three APJs were assigned.”
In Article 1, Section 8, Clause 8, of our Constitution, the founders were relatively specific. The founders give Congress power to secure “the exclusive Right” to “Authors and Inventors” in the “Writings and Discoveries”. Congress is given specific direction on how to do it (i.e., “for Limited Times”), and why it should be done (i.e., “To promote the Progress of Science and useful Arts”).
Unfortunately, the Leahy-Smith America Invents Act (AIA) of 2011 dramatically changed how the Executive branch implements the Constitutional prerogative. The AIA transferred power constitutionally allocated to the judicial branch to the executive branch – specifically, to Administrative Patent Judges (APJs) in the USPTO.
In the process of implementing the Patent Trial and Appeals Board (PTAB) on which the APJs sit, judicial independence, judicial ethics, rules of evidence, and other protections commonly afforded rights holders in disputes adjudicated by the federal judiciary were sacrificed in the name of expediency.
AIA is Ex Post Facto Law
Unbelievably, in 2011, Congress made the AIA retroactive and applicable to all patents still in force, which means retroactive application of the law dating back at least 20 years. The bargain struck between patent owners and the government is often described as a quid pro quo; rights in exchange for information. But the ‘ex post facto’ nature of the AIA and the ease with which patent claims can be challenged without ever being afforded a presumption of validity was not a part of the bargain. On its face this makes the AIA fundamentally unfair, if not unconstitutional.
Over the last nine years, since 2011, 84% of patents reviewed by the PTAB have been and ‘effectively’ invalidated. The resulting carnage has been cataclysmic. The PTAB has presided over a swath of IP destruction that spans more than a generation of innovation.
Finally, after eight years of the AIA, in “Arthrex Inc. v. Smith & Nephew, Inc., The Federal Circuit ruled that the APJs were ‘principal officers’ under the Appointments Clause, and that the APJ appointment provisions of the AIA creating the PTAB were unconstitutional because the APJs were not appointed by the President and confirmed by the Senate, as is required for ‘principal officers.’” [National Law Review]
Unfortunately, the Federal Circuit’s remedy was not to invalidate or nullify the decisions made by these unconstitutionally appointed APJs. Instead, the Federal Circuit rewrote the AIA to save the statute from unconstitutional infirmity, ordering the APJs to become employees at will and removable without cause by the Director of the USPTO. By rewriting the statute and turning APJs into employees at will, the Federal Circuit changed the proper characterization of these APJs from principal officers to inferior officers, without appointment by the President and confirmation by the Senate. This somehow retroactively made their past decisions constitutional.
Judicial Independence and Panel Stacking
There is a rule that discourages dissent within PTAB panels and requires permission from a superior prior to dissenting. The existence of this policy was confirmed in response to a FOIA request. Indeed, dissents and concurring opinions are not desired by PTAB supervisors because some APJs have been known to abuse dissents and concurrences in order to achieve production goals— APJs have a production quota in the same way that examiners have a production quota. But for APJs at PTAB they must justify to the Vice Chief Judge why a dissent or concurring opinion should count toward production goals, otherwise the work performed does not count. In other words, without permission of the Vice Chief Judge a dissent or concurrence by an APJ is done on the personal time of the APJ. It is no wonder there are so few dissents and that when there is a dissent it often seems, anecdotally, that it is one where the author believes the patent claims should have been found to be not patentable.
While the Office may have some justifiable interest in ensuring APJs do their fair share of productive work, perhaps a better approach would be to appoint judges who take the job more seriously and don’t game the system.
The judicial independence of the PTAB is also called into question by a practice known as panel stacking, which occurs when the Office appoints more judges to a panel than the standard three members. In an oral argument before the Federal Circuit in 2015, USPTO attorneys admitted that panel stacking occurs in order to achieve certain outcomes in cases.
The case where this nearly unbelievable admission was made during oral argument was Yissum Research Development Co. v. Sony Corp. (Fed. Cir. 2015). The pertinent part of the oral argument, which 717 has conveniently provided here, reads as follows:
USPTO: And, there’s really only one outlier decision, the SkyHawke decision, and there are over twenty decisions involving joinder where the –
Judge Taranto: And, anytime there has been a seeming other-outlier you’ve engaged the power to reconfigure the panel so as to get the result you want?
USPTO: Yes, your Honor.
Judge Taranto: And, you don’t see a problem with that?
USPTO: Your Honor, the Director is trying to ensure that her policy position is being enforced by the panels.
Judge Taranto: The Director is not given adjudicatory authority, right, under § 6 of the statute that gives it to the Board?
USPTO: Right. To clarify, the Director is a member of the Board. But, your Honor is correct –
Judge Taranto: But after the panel is chosen, I’m not sure I see the authority there to engage in case specific re-adjudication from the Director after the panel has been selected.
USPTO: That’s correct, once the panel has been set, it has the adjudicatory authority and the –
Judge Taranto: Until, in your view, it’s reset by adding a few members who will come out the other way?
USPTO: That’s correct, your Honor. We believe that’s what Alappat holds.
Alappat holds no such thing. Alappat dealt with a patent applicant seeking a patent where it would be reasonable for the Director (then Commissioner) to be setting Office policy. The PTAB is adjudicating winners and losers after a patent has already issued and is presumably, or at least statutorily, supposed to be presumed valid.
Nevertheless, expanded panels, or panel stacking as it came to be known, was explained by the Office to happen in only a relatively few cases. So, what is the big deal?
Panel makeup did come up in the Oil States oral hearing when Chief Justice Roberts asked: “Does it comport to due process to change the composition of the adjudicatory body halfway through the proceeding?
Department of Justice Deputy Solicitor General, Malcolm Stewart, limited his response carefully, replying: “This has been done on three occasions. It’s been done at the institution stage.” [Oil States Oral Hearing [Nov 2017]
Chief Justice Roberts’ question, however, was potentially illuminating.
To check the veracity of these statements, an extensive independent count was made of the number of APJs per case at the PTAB, as per data made available from Docket Navigator for 10,521 cases (circa Sept 2011 through Aug 2019). It was found that 9.13% (961 / 10,521) of PTAB trials had more than three APJs on the panel.
Does 9.13% of PTAB trials qualify as rarely? Most would probably find that to be more often than rarely, and a concerning number that requires further investigation to determine the specific reason as to why more than three APJs were assigned.
Perhaps there is a legitimate explanation, such as training new APJs, but the PTAB has operated in such a secretive manner historically that when such irregularities arise, such as more than three APJs being assigned, or panels changing in the middle of a case, questions arise. The PTAB would do well to answer these questions as they arise and not let imaginations run wild, because when a process that is supposed to be open since an issued patent is at stake is conducted with such secretive ways by those who will adjudicate the proceedings, it feels rotten.
To be fair, the number of expanded panels peaked in 2014 and then remained largely constant throughout the second Obama term. They have been on the decline during the Trump Administration, although data for 2018 and 2019 is partial, as cases are still in process.
The Arthrex Factor
The history of the PTAB, although brief, has been a sordid mess. If, in Arthrex, the Supreme Court considers the way the PTAB is actually run in practice, the question of whether APJs are principal officers or inferior officers is a much more difficult decision. On paper, the Federal Circuit decision in Arthrex seems perfectly logical, although the remedy is bizarre and constitutionally questionable— to say the least. In practice, however, PTAB superiors have historically micromanaged the PTAB in ways that demonstrate the absence of judicial independence.
What an irony it would be for the Supreme Court to decide that the Federal Circuit was wrong in Arthrex because those on the PTAB are merely employees who have no judicial independence and are not entitled to really be called judges. Chief Justice Roberts already hinted at that during oral argument in Oil States when he said that the chief judge of the PTAB was an “executive employee”. “When we say judge,” Roberts quipped, “we usually mean something else.