Federal Circuit Says Appointment Of PTAB Judges Unconstitutional

Last Thursday, the Federal Circuit found the appointments of Patent Trial and Appeal judges unconstitutional, in part because the judges do not receive sufficient oversight from the Director of the United States Patent and Trademark Office (USPTO). Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 18-2140 (Fed. Cir. 2019). The court cured the violation by severing a statutory restriction on the removal of PTAB judges, rendering the judges "inferior officers" that no longer require presidential appointment. The court then vacated and remanded the Board's decision, requiring a new panel of PTAB judges to hear the IPR on remand.

The constitutional challenge stemmed from an appeal from the Board's final written decision holding claims of Arthrex's patent anticipated. In its appeal, Arthrex contended that the appointment of PTAB judges violates the Appointments Clause of Article II of the U.S. Constitution.

The Appointments Clause states:

[The President] . . . shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

U.S. Const. art. II, § 2, cl. 2.

PTAB judges are ultimately appointed by the Secretary of Commerce, in consultation with the director of the United States Patent and Trademark Office. See 35 U.S.C. § 6(a). Accordingly, the crux of the issue was whether the judges are "Officers of the United States" under Article II, and if so, whether they are inferior or principal officers; the latter requiring an appointment by the President.

Appellees first argued that Arthrex forfeited its Appointments Clause challenge by not raising it until the appellate stage. But the Federal Circuit disagreed, finding that this was "one of those exceptional cases that warrants consideration despite Arthrex's failure to raise its Appointments Clause challenge before the Board," most notably because the PTAB could not have provided the relief the Federal Circuit settled on.

Turning to the substance of Arthrex's challenge, the Federal Circuit noted that an Article II "Officer of the United States," as opposed to a mere employee, is someone who...