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Supreme Court shakes up the PTAB

Year End 2021 IP Newsletter

A decade after the America Invents Act of 2011 (AIA) brought significant change to the U.S. patent system, the courts and players in the patent regime continue to grapple with some aspects of the law. In U.S. v. Arthrex, Inc., the U.S. Supreme Court weighed in on one lingering issue regarding the Patent Trial and Appeal Board (PTAB). In doing so, it delivered a new level of review to parties unhappy with PTAB decisions.

Patentee questions authority

The AIA established the PTAB within the U.S. Patent and Trademark Office (PTO). The Secretary of Commerce appoints the PTAB’s members, including more than 200 administrative patent judges (APJs) who are so-called “inferior officers.” The exception is the PTO director, who also sits on the PTAB and, as a “principal officer,” is nominated by the president and confirmed by the Senate according to the Appointments Clause of the U.S. Constitution.

Under inter partes review (IPR), the PTAB can reconsider and cancel an already-issued patent based on certain types of prior art. A party that disagrees with the decision can request a rehearing, but it’s solely up to the board whether to grant the request. The PTAB’s final decision is subject to review by the U.S. Court of Appeals for the Federal Circuit.

A panel of APJs conducted an IPR for a patent owned by Arthrex, and concluded it was invalid. On appeal to the Federal Circuit, Arthrex argued that the PTAB’s structure was unconstitutional. Specifically, it asserted that APJs are principal officers who must be appointed by the president with the advice and consent of the Senate. The Court of Appeals came down in Arthrex’s favor. The Supreme Court took up the case.

Supreme Court lays down the law

The Supreme Court focused on the lack of supervision over APJs by a “superior executive officer.” Neither the PTO director nor any other such officer can directly review APJ decisions. Moreover, the director can fire APJs only “for such cause as will promote the efficiency of the service.” APJs, therefore, exercise power that is incompatible with their status as inferior officers and, in turn, political accountability.

The Supreme Court concluded that the proper remedy is to allow the PTO director to review final PTAB decisions and, on review, issue decisions on behalf of the board. Accordingly, it remanded the case to the acting director to determine whether to grant Arthrex’s rehearing request.

The PTO gets on board

Shortly after the Supreme Court released its ruling, the PTO issued some guidance on the implications. Among other things, the guidance explains the interim internal process for director review of PTAB final decisions.

According to the PTO, an advisory committee will evaluate review requests and advise the director whether decisions merit review. Relevant factors include:

The director may initiate review (even if not requested by a party) of any final written decision or corresponding decision on rehearing. An internal management review team that reviews all PTAB final written decisions will alert the director to decisions that might warrant such review.

Stay tuned

The PTO guidance also addresses the effect of the Supreme Court ruling on ongoing PTAB proceedings, as well as board proceedings in general, and includes several critical deadlines. Additional guidance is expected.

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