Will Arthrex Blow Up The PTAB?

In the pending Supreme Court case, United States v. Arthrex, Inc., two main issues are presented before the Court.  One, whether the administrative patent judges (“APJs”) of the Patent Trial and Appeals Board (“PTAB”) are unconstitutionally appointed because they are principal officers.  Two, if APJs are unconstitutionally appointed, whether the Supreme Court should cure the relevant statute.  Arthrex requests that the Supreme Court wait for Congress to make the change.  This essentially means that the existing PTAB regime will be blown up and thousands of decisions will be vacated.  Will this happen?  Probably not.  This blog post addresses some key hub-issues that the Supreme Court raised during the oral argument on March 1st.

1. Will there be a bright-line test?

This question appeared at least ten times.  All judges except Justice Gorsuch and Justice Kavanaugh discussed it.  Arthrex argued for a rigid rule that any officers whose decisions are unreviewable by a politically accountable party are principal officers. However, except for Justice Thomas who seemed to like a bright-line rule, the other judges appear more likely to accept a standard, rather than the rule which Arthrex endorsed. It also appears that the “substantial control” test, initially provided by the government and Smith & Nephew, is too amorphous. 

2. Is direct reviewability required?

This question appeared at least five times.  Justice Sotomayor did not seem to be bothered by the lack of direct review, while Justice Robert and Justice Kavanaugh paid extra attention to this problem.  This question is vital to the outcome of the case because Arthrex argues that APJs’ decisions cannot be changed solely at the discretion of the Director of the United States Patent & Trademark Office (“USPTO”).  The argument loses much of its force if the answer to this question is negative.  On one hand, the judges worry this case would create a model for Congress to eliminate agency review.  On the other hand, the Director does have some control over the APJs by “twisting the[ir] arms” through his/her ability to promulgate binding guidance concerning substantive patent law, designate particular board opinions as precedential, deciding whether any particular review will be instituted,  deciding which judges will sit on the panel, etc.

3. Is structural accountability sufficient for inferior officers?

Justice Roberts, Justice Gorsuch, and Justice Kavanaugh asked this question.  The answer to this question seems dispositive.  On its face, no one is accountable for APJs because some of their decisions cannot be directly reviewed.  Although Justice Roberts questioned the practicality of keeping the Director accountable for every adjudication, and Justice Thomas questioned the importance of accountability in this case, the underlying constitutional concern still stands.  The most forceful counterargument seems to be the existence of structural accountability.  Because the President of the United States (“POTUS”) has direct control over the Director, who issues policies that bind APJs, the Director and POTUS would be accountable for APJs in an indirect but visible way.  It is not readily apparent how the judges will decide this matter yet.

4. What is the relief?

Although most of the discussions revolved around the constitutionality of APJs, many judges were curious about what the relief should be if they were to hold that the APJs are unconstitutionally appointed.  This question appeared five times.  Most judges “frown upon” Arthrex’s contention that the Supreme Court should leave everything to Congress and vacate APJs’ decisions.  The concern is real.  First, the influence of vacating APJs’ pending decisions is huge.  Blowing up the whole system due to a structural problem does not really fit the Supreme Court’s conservative personality.  Also, this may result in an extremely high volume of cases before the PTAB and the Federal Circuit.  Second, Congress can be slow.  Third, there are other available remedies.  Although Arthrex argues that the potential remedies point to opposite directions, it does not seem to prevent the Supreme Court from stepping into Congress’s shoes and inviting Congress to step in if they disagree.  The only support comes from Justice Barrett.  Justice Barrett appears to suggest that there is no Supreme Court case where the Court “blue-penciled” on behalf of Congress when there are multiple potential solutions for the unconstitutionality.  However, it still wouldn’t prevent the Supreme Court from having such a decision this time.  Therefore, it is quite unlikely that the Supreme Court will give Arthrex what it really wants by blowing up the PTAB.

5. Are there other considerations?

Yes.  One very important point of discussion that might eventually be included in the Supreme Court’s opinion is the implication of “history,” and there are two lines of history pointing at two opposite directions.  On one hand, Justice Gorsuch and Justice Kavanaugh described the appointment of the APJs as a “rare bird” in the history due to the vast amount of responsibility but lack of supervision.  On the other hand, Justice Sotomayor and Justice Kagan focused more on the history of the USPTO.  It appears that they want to view Congress’ inaction as an indication of their intention that the APJs are inferior officers.

In addition to the questions on history, Justice Thomas and Justice Breyer want to entertain the question whether the Director could delegate the authority to the APJs.  Arthrex essentially answered that delegation is not an issue here.  Similarly, when Justice Roberts asked Smith & Nephew about the due process concern, Smith & Nephew answered that due process is not an issue here, either.

To summarize, the Supreme Court could take one of three major approaches in this case.  One approach is to uphold the constitutionality of the APJs and reverse the Federal Circuit, thereby preserving the status quo.  It appears that Justice Breyer, Justice Sotomayor, and Justice Kagan may take this view.  A second approach is to announce that the APJs are unconstitutionally appointed but coming up with a solution to cure it.  This can be achieved either by taking the Federal Circuit’s approach or finding an alternative.  Justice Alito, Justice Gorsuch, Justice Kavanaugh, and Justice Barrett appear to favor this view.  The third approach is to hold that the APJs are unconstitutionally appointed and vacate their decisions.  However, this approach may only find a little bit of support in Justice Barrett’s stare decisis argument, thus making it highly unlikely that Arthrex will blow up the PTAB.