The case of Arthrex v. Smith & Nephew at the U.S. Court of Appeals for the Federal Circuit was something of a nuclear option for the patent dispute at hand, as it raised a constitutional question regarding the appointment of administrative patent judges (APJ) at the Patent Trial and Appeal Board (PTAB). The Supreme Court has agreed to hear a consolidation of three petitions for cert arising from the Arthrex case, the outcome of which could force the reopening of a number of cases already decided by the PTAB.

Arthrex began as a fairly conventional patent dispute, which in 2015 was heard in the U.S. District Court for the Eastern District of Texas. Arthrex Inc., of Naples, Fla., had sought to enjoin Smith & Nephew USA Inc., of Andover, Mass., from infringing several dozen claims related to 13 patents, and the defendant sought a PTAB hearing that largely landed in Smith & Nephew’s corner. Arthrex successfully appealed that finding to the Court of Appeals for the Federal Circuit with the argument that the appointment of APJs violated the Appointments Clause in 2019.

The Federal Circuit later declined to give the matter an en banc hearing, allowing its original determination to stand. The Federal Circuit said the problem could be resolved by severing the portion of the Patent Act that had restricted removal of APJs, thus rendering them inferior officers and liable to for-cause dismissal by the U.S. Patent and Trademark Office (PTO).

Supreme Court to hear two questions only

The question found its way to a hearing held by the House Judiciary Committee in November 2019, at which several witnesses urged congressional action due to the prospect that the courts might need two years or more to address the impasse. The Supreme Court granted cert to three petitions related to the Appointments Clause question in its Oct. 13 orders, but the court said it will entertain only two questions posed by the July amicus brief by the U.S. Solicitor General (SG). The first of these two questions was whether APJs are principal officers who must be appointed by the president with the consent of the Senate, or alternately are inferior officers whose appointments can be handled by the director of the PTO.

The second question posed by the SG assumes that APJs are principal officers and asks whether the Federal Circuit’s remedy of severing the application of Section 7513(a) of Title 5 of the U.S. Code to APJs is the appropriate one. The Supreme Court will not hear arguments over whether the Federal Circuit had erred in considering the Arthrex challenge of APJs under the Appointments Clause when that question had not been presented at the PTAB hearing.

Solicitor General Noel Francisco, who has since returned to private practice, said this issue is unlikely to arise in the other circuit courts because of the Federal Circuit’s status as a special patent court, thus eliminating a circuit court split as a motivation for granting cert. Francisco did point out, however, that the Federal Circuit panel that denied the en banc hearing was “sharply divided” on the question of whether to give the case another look, providing the kind of tension that might ordinarily help to motivate a grant of cert when seen among the other circuit courts.

Grant of cert not an indication SCOTUS disagrees

George Quillin, partner of Foley & Lardner, told BioWorld that the Supreme Court could affirm the Federal Circuit decision. “At one level, you wonder; if the Federal Circuit decision was okay, why grant cert?” Quillin asked rhetorically, but he noted that this was the scenario that played out in the 2018 Oil States case. That case was restricted to the question of whether the inter partes review process was constitutional, although the decision was a 7-2 split, with Chief Justice John Roberts and Justice Neil Gorsuch providing the dissent.

Quillin noted that if the Supreme Court reverses the Federal Circuit on the SG’s first question, the second one becomes moot. Because such a reversal would imply that APJs are not principal officers, the other cases that are pending over the question about APJs will no longer be a consideration as their outcomes will stand as written.

The Federal Circuit remedy was in effect to demote APJs to inferior officers, which eliminated their protection from for-cause removal, but Quillin said it is not clear why Congress drafted the statute to make APJs principal officers in the first place. “I’m not sure Congress thought very deeply about that,” he said, adding that the problem is not seen at the International Trade Commission (ITC).

When the ITC processes trade complaints involving intellectual property, the matter is handled by administrative law judges (ALJs), whose findings are reviewed by the ITC itself rather than being forwarded to a court of law. Also, as noted in a recent Federal Register notice, ALJs serving at the ITC for Section 337 cases are explicitly inferior officers, thus negating any such concerns.

Quillin said hypothetically, the Supreme Court could declare that the PTAB’s APJs are already inferior officers, thus overturning the Federal Circuit decision as superfluous, an outcome he said is unlikely. In any event, “it’s a close enough question that there are arguments both ways,” Quillin noted.

Another possibility is that the Supreme Court can find no remedy within the existing statute and that the entire statute is thus unconstitutional. This, too, is an unlikely outcome, but Quillin said the case of California v. Texas, which examines the individual mandate under the Affordable Care Act (ACA), presents the Supreme Court with a similar dilemma. The presumption is that if the individual mandate falls, the entire ACA goes with it, but Quillin said the similarity in the two cases might mean that the outcome in California v. Texas might be predictive of where the court will land in Arthrex.

Quillin noted that the Supreme Court may hear arguments for Arthrex by January 2021 and will most likely render a decision by the end of its current term, which would be a June 2021 decision at the latest. He said the case could carry over into the following term, but that this would be unlikely.

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