The Supreme Court held this week that the United States Patent and Trademark Office’s (“USPTO”) appointment of Patent Trial and Appeal Board (“PTAB”) judges cannot be constitutionally enforced because the USPTO director does not have authority to review final PTAB decisions.
Smith & Nephew, Inc. and ArthroCare Corp. petitioned for inter partes review in the USPTO against Arthrex, Inc.’s patent on a surgical device. A PTAB panel consisting of three administrative patent judges (“APJs”) concluded that Arthrex’s patent was invalid. On appeal, the Federal Circuit determined that the appointment of APJs violated the Appointments Clause, and it severed the limitations on their removability. The Appointments Clause requires the President to appoint principal officers, who then must be confirmed by the Senate before taking office.
In a split 5-4 opinion by Chief Justice Roberts, the Supreme Court held that APJs’ final decision-making authority made them principal officers who were therefore unconstitutionally appointed. The Court focused on the administrative design of the PTAB, and reasoned that because of “the insulation of PTAB decisions from any executive review, the President can neither oversee the PTAB himself nor ‘attribute the Board’s failings to those whom he can oversee.’” The Court further reasoned that “[APJs] accordingly exercise power that conflicts with the design of the Appointments Clause ‘to preserve political accountability.’” Justices Kagan, Sotomayor, Breyer, and Thomas dissented, arguing that the majority decision represents “a larger shift in our separation-of-powers jurisprudence” and that “the nature of the PTAB calls for technically correct adjudicatory decisions [but] . . . [t]he Court’s decision prevents Congress from establishing a patent scheme consistent with that idea.”
The justices also voted 7-2 that giving the USPTO director the power to review agency decisions would fix the Constitutional problem. As of this writing, the USPTO has yet to announce the ways in which the director intends to review PTAB decisions, but the Supreme Court’s opinion provides helpful guidance: “To be clear, the director need not review every decision of the PTAB. What matters is that the director have the discretion to review decisions.”