In Separation of Powers Ruling, Supreme Court Rejects PTAB System for Patent Disputes and Orders PTO Panel Decisions to be Reviewed by Agency Director

U.S. Supreme Court building
United States Supreme Court Building. / Photograph provided by Carol M. Highsmith Archive, Library of Congress, Prints and Photographs Division.

The Supreme Court, applying a doctrine that urges strict separation of authority among the federal government’s three branches, invalidated June 21 a statutory scheme that excludes politically-appointed functionaries from intellectual property disputes. The decision introduces uncertainty into a key process by which the validity of patents is determined.

The case arose from a dispute over whether a patent could be issued for technology that allows for the reattachment of soft tissue to bone. A little-known tribunal of the U.S. Patent and Trademark Office called the Patent Trial and Appeal Board decided the contretemps between medical device manufacturer Arthrex, Inc. and one of its competitors. The board ruled that a British company previously sought a patent that “anticipated” Arthrex’ invention and invalidated its patent. Arthrex lawyers argued that the APJs who decided the dispute were unconstitutionally appointed by the Secretary of Commerce and that the PTAB decision should be nullified.

A 5-4 majority of the justices agreed. “We hold that the unreviewable authority wielded by APJs during inter partes review is incompatible with their appointment by the Secretary to an inferior office,” wrote Chief Justice John Roberts. “Congress has assigned APJs significant authority in adjudicating the public rights of private parties, while also insulating their decisions from review and their offices from removal.” 

Roberts and four colleagues said the Constitution’s order that the President “take Care that the Laws be faithfully executed” was offended by a statute that gave Article I judges the power to decide disputes with no oversight from any official he appointed. The five justices also determined that, while another provision of the nation’s charter called the appointments clause allows the chief executive to be helped by officials not appointed by him and confirmed by the Senate, their work “must be directed and supervised by an officer who has been.” 

While “thousands of officers wield executive power on behalf of the President in the name of the United States,” Roberts emphasized that the bureaucracy can function in a manner consistent with the Constitution only if it “acquires its legitimacy and accountability to the public through a clear and effective chain of command down from the President, on whom all the people vote.” The majority concluded that giving the Secretary of Commerce the power to appoint the APJs insulates their decision-making from accountability to the public. “As Hamilton wrote, the sole and undivided responsibility of one man will naturally beget a livelier sense of duty and a more exact regard to reputation,” Roberts wrote. 

The next question, according to Roberts, was whether the APJs could be considered the kinds of executive branch officials — called “inferior” officers — who do not need to be appointed by the President and confirmed by the Senate. “Whether one is an ‘inferior’ officer depends on whether he has a superior other than the President,” Roberts said. “An inferior officer must be directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.” The APJs could not be considered inferior officers of the government because, while the PTO director is their ostensible administrative supervisor, he lacks control over their conclusions in the disputes they hear. “He is the boss, except when it comes to the one thing that makes the APJs officers exercising significant authority in the first place — their power to issue decisions on patentability,” Roberts said.

To fix that problem, five justices rejected Department of Justice arguments that the PTO director could use his administrative oversight authority to effectively oversee PTAB decision-making. Roberts dismissed these suggestions as unhelpful. “That is not the solution,” the chief justice wrote. “It is the problem. The Government proposes (and the dissents embrace) a roadmap for the Director to evade a statutory prohibition on review without having him take responsibility for the ultimate decision.” They also brushed aside an argument from Arthrex that the entire patent dispute should be dismissed because language in the America Invents Act, a 2011 law that established PTAB, is unconstitutional.

Instead, Roberts and three other justices decided in a separate part of the court’s opinion to invalidate only the language in the America Invents Act that insulated PTAB decisions from review by a presidentially-appointed and Senate-confirmed principal officer of the Department of Commerce. “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 [of the PTO] from reviewing final decisions rendered by APJs,” the plurality wrote.

Justin Krieger, the managing partner at Kilpatrick Townsend’s Denver office and a patent lawyer, said the court’s opinion leaves open the potential for political manipulation of the PTAB process. “Under what circumstances, if ever, will the director, on his or her own, seek review of a decision?,” he asked. “Let’s say it’s pharma — vaccines, that’s a hot topic right now — or oil and gas — that’s always a hot topic — or high technology. Suppose the president is of the view that vaccines in a pandemic shouldn’t be patented. In a situation like that they might step in and say we’re going to declare that patent invalid.” Krieger acknowledged this sort of interest in the PTAB’s work may be “highly unlikely,” but pointed out that, nevertheless, “there are many circumstances where I could see a president and the executive branch wanting to direct their policy through things such as the PTAB.” 

On a more practical level, it is also possible that the PTO director’s involvement might weaken the technical expertise that PTO proceedings usually involve. While very few disputes over patents go to the PTAB, Krieger said, the tribunal’s makeup is helpful to litigants arguing over complex engineering or scientific issues that are often at the core of patent validity dustups. “There are probably 200-250 administrative patent judges that make up the PTAB,” Krieger said “They all have technical backgrounds.” Historically, the PTO director has usually had “tremendous patent experience,” Krieger said, but he is a political appointee and that is not a statutory prerequisite to serving in the role.

Justice Neil Gorsuch disagreed with the plurality’s choice of remedy. Congress did not specify a course of action for courts to follow if one part of the America Invents Act was held unconstitutional, he said, leaving the court with no guidance about legislators’ preference. In that circumstance, the Colorado jurist wrote, the justices should invoke “traditional remedial principles.” “Early American courts did not presume a power to sever and excise portions of statutes in response to constitutional violations,” Gorsuch said. “Instead, when the application of a statute violated the Constitution, courts simply declined to enforce the statute in the case or controversy at hand. I would follow that course today by identifying the constitutional violation, explaining our reasoning, and setting aside the PTAB decision in this case.”

Four justices – Stephen Breyer, Elena Kagan, Sonia Sotomayor, and Clarence Thomas – dissented. Breyer, joined by Kagan and Sotomayor, argued that the majority asked for too much specificity on the question of how much control a presidential appointee exercises and should consider more carefully the exact job of the executive branch agency under scrutiny. 

Thomas, on the other hand, said the APJs are too far down the executive branch organization chart to require presidential appointment and Senate confirmation. “Neither our precedent nor the original understanding of the Appointments Clause requires Senate confirmation of officers inferior to not one, but two officers below the President,” the court’s senior justice wrote. His dissent was largely joined by Breyer, Kagan and Sotomayor.

The case is United States v. Arthrex, Inc., No. 19-1434.

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