Smith & Nephew and the United States filed their reply briefs on January 22. In its , the United States rebuts many of the positions taken by Arthrex in its initial merits brief. While Smith & Nephew, in its , also addressed聽many issues raised in amicus briefs, the United States focuses more directly on the arguments made by Arthrex.
In the Arthrex cases (docketed as ), Arthrex has argued that the key issue in determining whether an administrative patent judge (APJ) is a principal or inferior officer is whether that judge鈥檚 decisions are reviewable by a principal officer. Under this standard, Arthrex argues that the USPTO鈥檚 APJs are principal officers and that they must be appointed by the President with the advice and consent of the Senate.1听Additionally, Arthrex has argued that the Director鈥檚 exercise of power to control APJs (as the United States suggested in its initial brief), would be a violation of due process.
Rearguing APJs are Inferior Officers
The United States reiterates its position that under the current statutory scheme APJs are inferior officers while pushing back against Arthrex鈥檚 interpretation of the Court鈥檚 jurisprudence on the Appointments Clause.
The United States first argues that the Court鈥檚 prior decisions on the Appointments Clause only require that inferior officers be directed and supervised at some level,2聽a standard that the United States argues is met by a combination of the powers held by the Secretary of Commerce and the Director of the USPTO.3听While the Secretary鈥檚 power to remove an APJ is limited to situations that 鈥減romote鈥 the efficiency of the service,4聽the United States argues that this is still a broad enough power to meet the standard set by the Court. Arthrex relied on Abrams v. Social Security Administration to argue that under the efficiency of the service standard, misconduct by an APJ, such as not following the Director鈥檚 policies, is not sufficient cause to dismiss an APJ.5聽However, the United States points out that this case is not directly applicable, since the Social Security judge in question could only be dismissed for 鈥済ood cause鈥 under 5 U.S.C. 搂 7521, which is much stronger protection than APJs enjoy under 搂 7513.6听The United States takes the position that an APJ鈥檚 refusal to follow the Director鈥檚 instructions would be sufficient cause to remove the APJ, as misconduct by the APJ would have an adverse impact on the efficiency of the agency.7
The United States also highlights the Director鈥檚 ability to remove APJs from their judicial duties for any reason.8聽Arthrex argued that removal from judicial duties alone is not sufficient and that, for an APJ to be an inferior officer, the Director must have the power to remove an APJ from office entirely.9聽However, the United States points out that the Judge Advocate General in Edmond had these same limitations on removal powers, and yet the Court found that 鈥渢he ability to remove administrative judges from their judicial assignments provided a powerful tool for control.鈥10聽In addition, the United States argues, removal from judicial duties would not be a 鈥渧acation鈥 as Arthrex put it,11聽since the APJ could be assigned to other, non-judicial tasks.
The United States goes on to discuss how the Director is further able to control APJs through policies, 鈥渋ncluding by promulgating regulations governing the Board鈥檚 adjudicatory process, issuing binding policy directives, and determining what, if any, precedential weight a final Board decision will receive.鈥12聽For example, the United States takes the position that the Director is properly able to terminate an IPR proceeding before a final written decision is issued.13聽In this way, the Director can ensure that APJs are following policy guidance and can prevent a poor decision by a panel from being finalized.14
On Due Process and Public Franchises
One major theme in the Arthrex brief (and many of the amicus briefs filed in support of Arthrex) is that the Director鈥檚 use of power in this way would violate due process rights.15聽The Court considered and rejected a similar argument in Oil States.16聽Here, the United States questions how giving a principal officer review power of APJ decisions would cure a due process violation:17
鈥淚f it does not inherently offend due process for such an official to personally conduct or review every administrative adjudication, there can be no inherent due process problem when the same official selects which inferior officers will comprise an adjudicatory panel, publishes policy directives for those inferiors to follow, or exercises his other legitimate authority to supervise them鈥攑articularly where any final decision is subject to judicial review in an Article III court.鈥18
The United States, following the Court鈥檚 decision in Oil States, further states that it is not a due process violation to take a second look at the granting of a patent, as patents are 鈥減ublic franchises鈥 and not private rights.19 The Secretary and Director, so the argument goes, have a valid interest in ensuring that the USPTO is granting patents in a consistent way, and IPRs are one way of doing so. Any unfairness, the United States argues, should be taken up in an Article III court, not through an invalidation of the powers that Congress has given to the Secretary and the Director.20
Working Out an Appropriate Remedy
Should the Court find that APJs are principal officers, the United States urges the Court to adopt the lower court鈥檚 remedy and strike the removal protections from APJs. Alternatively, the United States argues that the Court should consider striking 35 U.S.C. 搂 6(c).21聽Doing so would allow the Director to review and reverse Board decisions.22
Arthrex asserted that the principle of constitutional avoidance should influence the Court to leave a solution to Congress, because while eliminating tenure protections may solve the Appointments Clause issue, it would not overcome the possible due process violations.23聽The United States argues that if the Court does reach the issue of severability, constitutional avoidance has 鈥渘o remaining role to play.”24聽Instead, constitutional avoidance should lead the Court to favor finding that APJs are inferior officers, since such a finding would avoid an Appointments Clause infirmity.25
Finally, the United States points out an alleged inconsistency in Arthrex鈥檚 arguments. Arthrex argued that to ensure that Congress鈥 intent in passing the AIA is preserved, a solution should be left up to Congress.26 Arthrex also argued that the IPR system should be declared unconstitutional. The United States asserts that these positions are incompatible, since destroying IPRs would certainly defy Congress鈥 intent.
Next Steps
Arthrex鈥檚 reply brief is due before February 21, 2021, and oral argument聽for the case is scheduled for Monday, March 1, 2021. Continue checking the PTAB Trial Insights Blog聽for analysis on these and future developments in the upcoming weeks.
———————————————————-
1聽Arthrex Br. at 34.
2听See Edmond v. United States, 520 U.S. 651, 663 (1997).
3听U.S. Reply at 6, 13-14.
4听5 U.S.C. 搂 7513
5听Arthrex Br. at 37 (citing Abrams v. Soc. Sec. Admin., 703 F.3d 538 (Fed. Cir. 2012)).
6听U.S. Reply at 7-8.
7听U.S. Reply at 6-7 (citing Cobert v. Miller, 800 F.3d 1340, 1351 (Fed. Cir. 2015)).
8听U.S. Reply at 8.
9听Arthrex Br. at 38.
10听U.S. Reply at 9 (quoting Edmond, 520 U.S. at 664.)
11听Arthrex Br. at 38.
12听U.S. Reply at 10.
13听U.S. Reply at 12.
14听U.S. Reply at 13.
15听See e.g. Arthrex Br. At 41-42.
16听Oil States Energy Servs., LLC v. Greene鈥檚 Energy Grp., LLC, 138 S. Ct. 1365 (2018).
17听U.S. Reply at 15-16.
18听U.S. Reply at 16 (citing Kalaris v. Donovan, 697 F.2d 376, 401 (D.C. Cir.)).
19听U.S. Reply at 16 (citing Oil States at 1374-1375).
20听U.S. Reply at 17.
21听U.S. Reply at 40-41.
22听U.S. Reply at 41.
23听Arthrex Br. at 62-64.
24听U.S. Reply at 39.
25听Id.
26听Arthrex Br. At 54.