Arthrex Aftermath: How the Landmark Supreme Court Decision Drives the PTAB’s Future

“We will still need to see how the PTAB will address Arthrex procedurally [but] it seems unlikely that the high burden under 37 CFR § 42.71(d) for granting rehearing will change, even for requests for rehearing to the Director.”

https://depositphotos.com/84041896/stock-photo-whats-next-sign.htmlA working definition of inertia is the tendency of a body to maintain its state of rest or uniform motion unless acted upon by an external force. As it did in Oil States (S.C. 2018), inertia appears to have played a role in the Supreme Court’s decision in the United States v. Arthrex, in which the central dispute was the remedy to address the unconstitutional appointment of administrative patent judges (APJs).

Possible remedies included vacating hundreds or thousands of prior final decisions by unconstitutionally appointed APJs, requiring all APJs to be confirmed by the Senate and then rehear previously-decided reviews, finding the entire statutory structure unconstitutional and handing invalidity/unpatentability determinations back to Article III Courts, removing employment protections for APJs (as the Federal Circuit did), or adding a layer of review so that inferior officers had appropriate responsibility under the Appointments Clause. Faced with these possibilities, the Supreme Court’s holding maintains the inertia of the Patent Trial and Appeal Board (PTAB) and again solidifies its role in patent litigation today.

The PTAB first opened its doors less than nine years ago, yet this was the sixth time in the Supreme Court has weighed in on an appeal from the PTAB. Previous decisions addressed the tribunal’s constitutionality, legislative authority, discretionary authority, and the availability of judicial review of the tribunal’s institution decisions. None of the prior decisions reached more than seven justices in the majority. Each decision also essentially maintained the status quo ante, save the one decision (SAS Institute Inc. v. Iancu) that was decided 5-4.

Given this history, and in hindsight, perhaps it should not surprise practitioners that Arthrex disrupted the status quo ante only after a 5-4 decision, and without a majority opinion of the Court as to remedy. In addition, it disrupted the status quo in what is perhaps the smallest way possible—by retroactively granting parties the right to seek a discretionary review from a Director who has been confirmed by the Senate. (Disregard, for a moment, that the PTAB does not presently have a Director who has been confirmed by the Senate. Instead, Drew Hirshfeld is the Acting Director and does not have Senate confirmation).

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Hardly a ‘Clear Course’

The Federal Circuit also found a remedy that did not significantly disrupt the PTAB’s caseload or parties and practitioners before the PTAB. Its solution, now vacated by the Supreme Court, essentially made APJs less secure in their job (in order to eliminate their status as “inferior” officers). Many practitioners viewed the Federal Circuit’s remedy as either creative or odd, and probably feel the same about the Supreme Court’s remedy. The Federal Circuit and the Supreme Court get A-pluses for creativity in trying to remedy the constitutional infirmities that they found. But the remedy selection was hardly a “clear course,” as the Arthrex majority asserts.

Nevertheless, given that Chief Justice Roberts wrote the majority opinion, it makes some sense that the Supreme Court found a constitutional violation. At oral argument in a prior PTAB case before the Court (Oil States), Roberts referred to APJs as “executive employee[s]” and questioned their title as “judges.” (See Oil States 11/27/17 Hg. Tr. at 46 (“When we say ‘judge,’ we usually mean something else.”).) APJs at the PTAB were likely to be found to be either inferior officers or officers acting in a principal capacity—either way, requiring Presidential appointment and Senate confirmation for their final decisions to be constitutionally sound. It is thus perhaps not surprising that the plurality opinion (the remedy discussion in Section III) concluded that “De­cisions by APJs must be subject to review by the Director.”

Director Rehearing Likely to Be Limited

The practical implications of Arthrex potentially could be straightforward for the PTAB and parties and practitioners before the PTAB. Assuming the hurdle of getting a Senate-confirmed Director will be overcome, the PTAB remains in place as a tribunal, 100+ APJs need not be confirmed by the Senate, there is no mandate that any single decision is actually re-heard, and prior work by panels in rendering hundreds of decisions need not be repeated. We will still need to see how the PTAB will address Arthrex procedurally. The U.S. Patent and Trademark Office Director will have the discretion to deny any or all requests for rehearing that result from Arthrex.

Requests for rehearing have not had much success at the PTAB, with total grant rates being consistently reported under 15% and sometimes under 5%. Keeping in mind that the grant rates include grants to clarify decisions that do not change the outcome, the effective grant rate drops even lower. It seems unlikely that the high burden under 37 CFR § 42.71(d) for granting rehearing will change, even for requests for rehearing to the Director. One can also safely assume that only final written decisions will be available for rehearing requests to the Director, and that the Director will not rehear other preliminary decisions or interim claim construction rulings. Given the new audience for requests for rehearing, parties should tailor any requests for rehearings of final decisions to the intended audience(s) to maximize their chances of success.

The Author

Scott McBride

Scott McBride is a shareholder at McAndrews Held & Malloy. His practice focuses primarily on the litigation and trial of patent and complex technology cases in federal courts and before the Patent Trial and Appeal Board, and reexamination proceedings before the Patent Office. Scott has a proven ability to help clients procure or acquire valuable intellectual property to protect their business, reach advantageous arrangements for solving intellectual property disputes where appropriate, and aggressively litigate patents when necessary.

Scott McBride

Alex Vogler is an Associate at McAndrews, where he focuses his practice on intellectual property litigation. Alex has experience with pre-suit investigation and assessment, drafting license agreements, due diligence investigations, motion practice, and various discovery matters. Alex graduated with honors from the University of Chicago Law School. During law school, Alex was awarded with the Leonard G. Nierman Scholarship, awarded to an outstanding student who exhibits interest in a career in patent law.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 18 Comments comments. Join the discussion.

  1. Patent Investor June 23, 2021 3:22 pm

    No comment on potential relief for those cases headed to, or already at, the CAFC?

  2. Brian June 23, 2021 5:50 pm

    Everyone who raised the Arthrex issue just got notified by the CAFC.

    Upon consideration of the recent decision of the
    Supreme Court in United States v. Arthrex, Inc.,
    IT IS ORDERED THAT:

    (1) Within 14 days from the date of this order, the
    parties that raised an Appointments Clause challenge
    shall file a brief, not to exceed 10 pages double-spaced,
    explaining how they believe their cases should proceed in
    light of Arthrex. Responses from the other parties, including the United States Patent and Trademark Office,
    subject to the same length restrictions, are due within 14
    days thereafter.

    (2) All deadlines and proceedings are stayed.

  3. Anon June 23, 2021 6:03 pm

    Is this an overlooked point:

    and without a majority opinion of the Court as to remedy.

    Elsewhere, it has been asked WHY the choice by the Justices to “agree with” but NOT officially “join” that Section III.

    Could it be an underlying (and unstated) recognition that actually re-writing the law as written by Congress — with zero evidence of intent or even consideration – is ultra vires and beyond the proper limits of authority for the Supreme Court?

  4. Brian June 23, 2021 7:01 pm

    Scott : “One can also safely assume that only final written decisions will be available for rehearing requests to the Director”

    But the SCOTUS decision says:

    “We also conclude that the appropriate remedy is a remand to the Acting Director for him to decide whether to rehear the petition filed by Smith & Nephew.”

    NOT just the FWD.

  5. Night Writer June 24, 2021 8:48 am

    “We conclude that a tailored approach is the appropriate
    one: Section 6(c) cannot constitutionally be enforced to the
    extent that its requirements prevent the Director from reviewing final decisions rendered by APJs.”

    I think that amounts to an advisory opinion. It is strange when one thinks about it. It is apart of a remedy but the Scotus was not briefed on whether the director review final decisions–this was not at issue.

    So how odd to have an advisory decision as part of the remedy.

  6. First of the Gang to Die June 24, 2021 8:55 am

    Everyone’s complaining about the remedy. Look, the case was about the APJs being unreviewable. Oil States is already law. The IPR system is currently constitutional.

    If the Arthrex is complaining about unreviewable authority, the solution is to make them reviewable. Problem solved. The court enjoined enforcement of the clause making them unreviewable.

    Not a bad remedy, for the problem at hand. Of course, there are technical complaints. But most people here just seem annoyed SCOTUS didn’t enjoin everything like you wanted.

    The case for that was Oil States. If you are complaining about the remedy, then I presume you didn’t care so much about the actual complaint, i.e. APJs being unreviewable.

  7. Ben Borson June 24, 2021 11:59 am

    Does the Court address Ex parte Appeals? Will Arthrex derail the many past and current Appeals?

    Day Writer

  8. Josh Malone June 24, 2021 12:00 pm

    How does a party summon this review genie to reconsider the subjective holding of a biased bureaucrat in favor of the tech giant that it would have been obvious to combine x, y, and z?

  9. BP June 24, 2021 1:57 pm

    @7 Ben, I think they skirted the ex parte review issue.

    Firstly, if the APJs were unconstitutionally appointed, that carries over to all functions/tasks they perform – there’s prior case law on that point. How stupid would it be to have an admin judge not properly appointed performing various tasks that bear on the reasons for the agency’s existence. If APJs were properly appointed as principal officers, there would have been more scrutiny as to conflicts (past representation) and/or procedures for recusal. Guess what, that didn’t happen.

    I find it odd that the SCt seems to say that the APJs were “acting like” principal officers in only a single task, handling of IPRs. Is that an attempt/sleight of hand to cause the least amount of damage to all tasks performed by the unconstitutionally appointed APJs? To be sure, decisions from APJs that were unconstitionally appointed by corporate agents (e.g., panel stacker Director Lee) with employment protections (can’t easily be removed) have an inherent if not explicit impact on ex parte review.

    As a side point, decisions in ex parte are somewhat “protected” by 37 CFR 1.198 in that the Director cannot reopen prosecution for matters already adjudicated. For IPRs, in contrast, the courts have held that doesn’t matter, even if it was an Article III court that “already adjudicated”.

    Following ex parte review, once a patent issues, it seems like the Director can then pretty much do whatever the Director wants to do. In this sense, the “matters not already adjudicated” of 37 CFR 1.198 appears to be a modicum of protection for an applicant in a very small window of time in a particular procedure (post PTAB appeal decision) as the application returns to the jurisdiction of the TC.

    As you can see, the whole system is pretty messed up and Gorsuch is the person that best identifies the ways it’s messed up (concurrence).

  10. Anon June 24, 2021 2:15 pm

    First of the Gang to Die,

    I have to ask: are you an attorney?

    I do not ask with the view to denigrate your view. But there is a sense of WHY there are complaints about the remedy that are far more easily understood if you have studied law and have a notion of this concept called Rule of Law.

    When fashioning remedies — any remedies — precepts of law are (and must be) in play.

    One notion that I have often used is the notion of the Ends (no matter how noble) do not justify the Means. This is especially true in law, and has been reflected in the story of Sir Thomas More.

  11. Anon June 24, 2021 3:53 pm

    Night Writer,

    You are edging closer in at least recognizing that the remedy was “not at issue.

    The concept of advisory opinion has to do with whether or not the decision (itself) it to a present issue at law.

    You are correct to draw attention to deficiencies of a remedy (and I have no issue with that, as I have been right there with you).

    Here, the decision is drawn to a present legal issue. That decision on the legal issue is indeed separable from the provided remedy.

    This are merely multiple facets of law on hand here. And much like my comment to FotGtD, it does matter whether or not the legal underpinnings are appreciated. We both find Constitutional fault with THE REMEDY provided. But the term ‘advisory opinion’ is simply not a proper term here.

    See:https://www.americanbar.org/groups/probono_public_service/policy/judicial-participation/advisory-opinions/

    An advisory opinion is an interpretation of the law as it applies to a set of facts provided in writing by the individual requesting the opinion. The purpose of an advisory opinion is to provide guidance to an official or employee before the official or employee engages in an action that may be prohibited.

    Expressly note here that the official at point (the Director) has NOT been the one asking whether or not an action of performing the Court’s Four person holding remedy may or may not be prohibited.

    Were the Director to do so, THAT may be asking for an illicit advisory opinion.

    What we actually have here is a deficient remedy (or even an ultra vires one).

    A further note to FotGtD – it is exactly focusing on this deficiency or ultra vires nature of the remedy provided that attorneys SHOULD BE focusing on.

    This has nothing at all to do with “But most people here just seem annoyed SCOTUS didn’t enjoin everything like you wanted.” – “wanting” is NOT the determinative of what a proper legal action entails.

  12. Night Writer June 26, 2021 8:35 am

    @11 anon.

    Shush. You do not understand the Scotus and Constitutional law. I consistently predict what the Scotus is going to do and you almost never get it right.

    I know what an advisory opinion is and I know what remedies are. I know that this is a strange hybrid arising from the Scotus re-writing the statute.

  13. Anon June 26, 2021 12:22 pm

    Night Writer,

    Your assertions have no merit.

    I consistently show a better understanding of the law than you, and have previously debunked the value of “predicting what the Supreme Court will do” by highlighting the fact that the better position is in discussing WHY the Supreme Court should do one thing as opposed to another.

    As to the current assertion of your that you “know” – if you did then you would not continue the error that I first pointed out to you.

    Here – in fact – you seem (finally) to be recognizing the plain fact that I have been correct all along, even as you start to adjust your position accordingly.

    The better reply from you would be a simple, “Thank you.”

  14. Night Writer June 28, 2021 5:34 am

    @13 Anon

    Look what I wrote about this is correct. You yap on and on about details and the technical definition of “advisory opinion” by the ABA. You sound like a 1L.

    The fact is that this statement by the Scotus: “… Section 6(c) cannot constitutionally be enforced …” amounts to an advisory opinion. I know that it doesn’t fit the mold of an traditional advisory opinion but what it does do is fit the core problem of an advisory opinion in that the Scotus was not briefed on this issue and the director has not done what the Scotus says he/she can now do as it would be unconstitutional to enforce the director not doing it.

    I am not going to go on and on with you. I get that you have a very literal understanding of Scotus law so that you cannot see the point I am making. And I get that it does not literally fit what an advisory opinion is. But this decision and advisory opinions share common problems and the reason we don’t have advisory opinions is that they have the same problem as this opinion does in terms of ripeness, no actual P or D, and so forth.

    I haven’t changed my opinion. You are simply understanding it better as you force me to paint by numbers with you.

    Please stop.

  15. Anon June 28, 2021 8:23 am

    And you, Night Writer, sound like a failed 1L when you seek to dismiss the details provided and merely proclaim that you are correct.

    Clearly you are not — given the very details that I have provided.

    Your statement backtracks to the confusion between adjudicating an issue (whether or not AN issue is present) and the separate notion of whether the prescribed remedy — after the issue has been adjudicated — is proper.

    You are simply misusing a term of art.

    When you say “not briefed on the issue” you only compound what the issue being adjudicated actually was.

    It is rather odd that you want to persist in your error, especially given the fact that I also have provided details and reasoning as to why the remedy is inappropriate.

    This too goes to why your desire to pat yourself on the back for guessing the outcome falls short. It just isn’t that hard to guess what an anti-patent court is going to have as an outcome to the issue being adjudicated, and why it is so much more valuable to delve into those “1L details” (as you attempt to denigrate).

    You are the one painting yourself as the noob, and then simply being obstinate rather than doing the better thing of saying “thank you.”

  16. Night Writer June 28, 2021 3:28 pm

    Just nonsense what you are saying. My point is a good point and I’d wager that there are some Constitutional law journal articles on this very issue.

    Not going to go through it again with you.

  17. Anon June 28, 2021 4:17 pm

    LOL – your “Not going to go through it again with you.” presumes that you EVER did so in the first place – at the same time you seek to dismiss the details that I have laid before you.

    The fact that you want to believe in the power of your own word — with nothing else – (“My point is a good point“) simply misses the fact that you have misused a term of art – and I have shown you – in detail exactly how.

    While I will not wait for the appropriate ‘Thank you’ from you, that remains your best option.

  18. PTO-indentured July 5, 2021 11:07 am

    @8 Josh Malone

    I agree with our attention needing to be on what could amount to a next shell game (having no or few peas) put before U.S. inventors already hammered by the PTAB, found to wield a next (‘horribly clear’) 85% lose-to-win ratio.

    Come on PTO (please!), “that patentees were not getting fair treatment” under AIA’s (unconstitutional) PTAB — and this reality was “horribly clear” before 2012 ended, according to AIA’s chief architect — clearly explain NOW, to these same patentees (by one properly authorized to do so), the steps needed to win back ‘the property’ wrongfully judged, then taken from them.

    Please explain HOW this will occur, WHEN, and how long will it take to resolve / make right a patentee’s case.

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