“If the PTAB’s IPR decisions are nonbinding, it would allow Article III courts to give them due consideration, yet decide validity de novo, eliminating the constitutional problem—similar to the treatment of decisions by non-Senate confirmed magistrate judges.” – Brief of “39 Aggrieved Inventors”
Eleven amicus briefs were docketed with the Supreme Court of the United States (SCOTUS) during the last two business days of 2020 in United States v. Arthrex, Inc., et al., which is scheduled for oral argument on March 1, 2021. Several of the briefs were filed by independent inventors, who implored the Court to acknowledge the stories of entrepreneurs and small inventors who have been adversely impacted by the Patent Trial and Appeal Board (PTAB), in part because Administrative Patent Judges (APJs) are presently unaccountable.
The 2019 Federal Circuit decision in Arthrex ruled that the current statutory scheme for appointing APJs to the PTAB violates the Appointments Clause of the U.S. Constitution as it makes APJs principal officers. APJs have always been appointed by the Secretary of Commerce, but principal officers must be appointed by the U.S. President under the Constitution, Article II, § 2, cl. 2. To remedy this, the CAFC reasoned that the narrowest remedy would be to sever the restriction on removal of APJs from the statute, which would render them inferior officers. The Court followed the approach set forth by the Supreme Court in Free Enterprise Fund v. Public Company Accounting Oversight Board (2010) and followed by the U.S. Court of Appeals for the D.C. Circuit in Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board (2012), and ultimately ruled that the PTAB’s determination that Arthrex’s claims were unpatentable as anticipated must be vacated and remanded to a new panel of APJs.
Make PTAB Decisions Nonbinding
A “Brief of 39 Aggrieved Inventors” includes the personal stories of five inventors who have fallen prey to the PTAB—either having their patents invalidated or becoming so bogged down in expenses that they have had to sell their businesses and/or patents. “If PTAB trials are to be an extra-judicial mechanism for revoking small businesses’ patent rights, the Constitution’s Appointments Clause demands that the Office’s Administrative Patent Judges rendering final decisions on patentability be constitutionally appointed with advice and consent of the Senate,” says the brief. It adds that, because of the way the America Invents Act (AIA) was written, when APJs do make mistakes, they are “accountable to no one” and their erroneous decisions are afforded great deference on appeal.
Citing U.S. Patent and Trademark Office (USPTO) statistics, the brief notes that 80% of the 3,414 final PTAB decisions on the merits through September 30, 2020 invalidated some or all of the challenged claims, and 62% found all of the challenged claims unpatentable. Furthermore, while the AIA was meant to solve small businesses’ patent troll problem, “of the more than 11,000 IPR petitions classified on the Unified Patents website, less than two percent were filed by small- or medium-sized entities against nonpracticing entities.” The brief goes on to recount the PTAB horror stories of Jodi Schwendimann, inventor of dark fabric transfer technology for inkjet printers; Patrick Buckley, virtual reality headset inventor and founder of DODOcase; Tom Pierson, founder of TAS Energy; Gene Luoma, inventor of the “Zip-It” for unclogging drains; and Glenn Sanders, inventor of Emmy-award winning wireless microphone technology. Ultimately, the brief argues that the case should either be dismissed or subsection (b) of Section 318 of Title 35 should be severed from the statute, “which would eliminate the Director’s issuance of certificates canceling claims based on IPRs, thereby making IPR determinations of unpatentability nonbinding.” It adds:
If the PTAB’s IPR decisions are nonbinding, it would allow Article III courts to give them due consideration, yet decide validity de novo, eliminating the constitutional problem—similar to the treatment of decisions by non-Senate confirmed magistrate judges.
APJs Must Be Appointed by the President
Bunch o’ Balloons Inventor and inventor advocate Josh Malone submitted a brief recounting his own long journey with the PTAB to defend his patents. Malone contrasted his experience before the PTAB with his experience before a magistrate judge:
I didn’t agree with all of his decisions, especially when he ruled that our licensing agreement precluded us from collecting lost profits for infringement. Regardless of whether the rulings were favorable or not, both parties were given due process and afforded fair consideration. This stood in stark contrast to my case before the APJs at the PTAB. The APJs had no experience in judicial matters, limited knowledge, and played an adversarial role in my case. Where the district judge presumed my patent to be valid, the APJs presumed it was not valid and adopted unreasonable assumptions and interpretations to support their skepticism.
While the magistrate judge is an inferior officer and his decisions subject to de novo review by his supervisors, “APJs have no such supervision, contrary to the assertions of the government Intervenor,” says the brief. Citing IPWatchdog founder Gene Quinn’s article on PTAB judges’ experience compared with district court judges, the brief notes:
Studies have shown that APJs are deficient in legal experience and accomplishments. The median bench/bar experience of an APJ is 17 years compared to 40 years for a federal judge. Nearly half of APJs join the PTAB having practiced law for 10 years or less, while zero district judges had 10 years or less experience prior to appointment. Many APJs join the PTAB having only achieved associate status at their firms.
APJs are likewise deficient in technical expertise, though they often overrule examiners who are actual experts, adds Malone, and are biased in favor of invalidation, according to US Inventor statistics showing that “APJs have invalidated claims in 2,138 of the 2,925 patents they have reviewed – a defect rate of 84% (as of 2 months ago).” Malone thus urges the Court to rule that APJs are Principal Officers of the United States, and require appointment by the President with the Consent of the Senate.
APJ Appointments Present Due Process and Transparency Problems
US Inventor’s brief explains that the Federal Circuit’s remedy in the case “would not have been preferred by Congress, and overlooks a constitutionally sound and non-disruptive way to downgrade APJs to inferior or non-officer status”. Like the “39 Inventors,” US Inventor suggests severing the part of the statute that makes final written decisions on patentability binding. Its two key arguments are:
- First, this Court may correct the erroneous severance remedy imposed by the Federal Circuit. If their decisions were deemed recommendatory in infringement proceedings instead of mandatory, APJs would then qualify as “inferior” officers, retroactively curing their unconstitutional appointments.
- Second, the two precedents that the Federal Circuit cited as support for concocting its “no-tenure” severance remedy do not plausibly suggest that result.
The brief makes reference to US Inventor’s amicus filing in another case, New Vision Gaming, which provides evidence to support the question of “whether the PTAB invalidates patents so frequently because its constituent APJs try to please their budget-minded bosses through revenue-enhancing decision making.” This due process argument underscores the importance of proper APJ hiring, says the brief. The current APJ hiring process also lacks transparency, and the brief notes that the parties in the present case cannot even agree on the number of APJs at the USPTO because that information is not readily available. Likewise, information on their qualifications and backgrounds is also unavailable, and US Inventor has been unsuccessful obtaining such data, even via Freedom of Information Act requests with the USPTO. “This void of information has led directly to unjust results at the agency, or at least to results that justify a perception of agency capture and corporate self-dealing,” says the brief. Citing an IPWatchdog article, the brief recounts the story of one APJ who was hired from Apple, presided over several dozen post grant challenges brought by Apple, in which Apple succeeded 96% of the time, and subsequently left the PTAB to return to Apple. The brief asks:
Had the Appointments Clause governed this APJ appointment, would he have gotten the job in the first place? At minimum, nomination and confirmation would have allowed inventors adverse to Apple who found this APJ assigned to their panels to have sought timely recusal. More likely, transparency about this APJ’s previous defense of Apple would have led the USPTO to bar him from Apple panels entirely, to forestall public outcry.
The brief adds that the Federal Circuit’s remedy in Arthrex not only represents bad policy, but is also bad law, in that the court misread the constitutional case law, misapplying Free Enterprise Fund v. Public Company Accounting Oversight Board and failing to distinguish Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board.
The entire PTAB system, including the APJ hiring scheme, “raise[s] concerns over access to justice, government transparency, agency capture, structural bias against inventors, and the ethics of revolving-door employment,” the brief argues. It concludes:
The Arthrex court of appeals’ decision recognizes the constitutional violation in how APJs are hired under the AIA. But that decision applied the wrong remedy. That remedy exacerbates the unusual PTAB departure from the “traditional model” of agency adjudication, in which adjudicators are independent and policy making occurs only through transparent and accountable agency head review. US Inventor therefore requests that this Court determine the correct remedy, which if not the remedy Arthrex advocates, is at least retroactive conversion of APJ decisions into advisory and nonbinding decisions. This would make APJs either inferior officers or non-officers, fixing faulty appointments retroactively.