CAFC Warned Hundreds of PTAB Appeals Potentially Subject to Appointments Clause Fallout

Supplemental Briefing Focuses on Remedies

As discussed last week, the Federal Circuit has requested supplemental briefing in Arthrex Inc. v. Smith & Nephew to assess how best to remedy a potential Appointments Clause violation. The supplemental briefing has now been submitted. While the Court deliberates whether it is appropriate to remand or vacate the Arthrex matter, the government’s brief and Appellee brief look to the potential impact in other PTAB appeals.

Supplemental briefing was submitted by the government, and parties.

Gov’t Brief (here)
Arthrex -Appellant (here)
Arthrocare- Appellee (here)

The Gov’t brief spends a fair amount of time arguing that the Federal Circuit should simply interpret 35 U.S.C. § 3(c) as not extending Title 5 employment protections to Administrative Patent Judges (APJs) rather than “scratching out” particular language that could have unforeseen consequences.

Thereafter, the gov’t switches its focus on the more pressing concern of practitioners and stakeholders. That is, “what happens to other PTAB appeals?” Here the gov’t brief emphasizes the belated raising of the Appointments Clause issue on appeal rather than before the agency (“forfeiture”), and the difference between improperly appointed officers and improperly insulated officers (APJs falling into the later category due to Title 5 employment protections). With this, the gov’t concludes:

" [T]his Court should make clear that a new proceeding before a different Board panel is not required. A remand would involve properly appointed officials, acting under whatever revised statutory regime the Court orders, conducting an independent evaluation of the merits de novo, such that they are free to reach completely different conclusions in their new final determination. But any Board panel, including the original, could make that de novo determination. . . .Thus, if the Court here concludes that APJs are insufficiently controlled in some respect under the current understanding of the relevant statutes, the Court should specify that on remand, any panel of APJs operating under the reformed statute may conduct a de novo review of the existing written record and issue a new final decision.

(internal quotes, citations omitted)

The gov’t brief then goes on to address the impact on other pending cases, arguing:

" If this Court excuses Arthrex’s forfeiture and both addresses the constitutional question and grants vacatur and remand, it should make clear that the same result should not obtain in subsequent cases involving forfeited Appointments Clause challenges. . . .¶ Were this Court to identify any Appointments Clause problem in the statutes governing APJs, the judiciary’s interest in maintaining the constitutional plan would be satisfied. There would be no similar need in future cases to excuse forfeiture. At that point, the usual rules of forfeiture should preclude relief for any other litigant with the same unpreserved Appointments Clause challenge. Thus, even if the Court reaches the merits and grants Arthrex’s request for a remand, it should specify that there is no such basis for granting relief to similarly situated challengers in the future.

(internal quotes, citations omitted)

Appellee, Arthrocare warns on the far reaching impact of an over-reaching remedy, explaining:

" Apart from the unfair prejudice to [appellee], remanding for a new hearing would open the floodgates and allow any patentee appealing an adverse IPR result to get a do-over any time (1) the PTAB issued a final decision before the Court’s contemplated ruling and (2) the patentee has raised (or may still raise) appointments issues on appeal. There are over 160 such IPRs. . .¶ Such relief (i.e., remanding numerous cases) would put the PTAB in a difficult position. On the one hand, the Court would be telling APJs that they can be terminated at will. At the same time, the Court would be imposing unexpected work on top of APJs’ existing dockets—thus making it harder to prepare thorough, well-crafted decisions that facilitate judicial review. The difficulty will be even more pronounced if the Court requires new panels.

Seems to me that the remedy here (remand or not) will be driven by balancing the equities in this particular case. It is noteworthy that the Appellant has also availed itself of PTAB proceedings as a petitioner — an inconvenient fact for Appellant in any balance of equities. As to the impact on other cases, the gov’t brief does a good job in distinguishing the rare circumstances where such a fulsome remand was found appropriate.

Interestingly, the Federal Circuit will hear further argument on the Appointments Clause next Monday morning in Polaris Innovations Limited v. Kingston Technology Co. Inc. Be sure the PatentsPostgrant.com webinar Monday afternoon.