The US Court of Appeals for the Federal Circuit denied a petition for panel rehearing regarding the constitutionality of decisions issued by the United States Patent and Trademark Office (USPTO) Patent Trial and Appeal Board (PTAB), holding that its decision in Arthrex, Inc. v. Smith & Nephew, Inc. (IP Update, Vol. 22, No. 11) also applies to final decisions issued by administrative patent judges (APJs) in inter partes re-examinations. Virnetx v. Cisco Systems, Inc., Case No. 19-1671 (Fed. Cir. May 13, 2020) (O’Malley, J.). The Court also denied (per curiam) a concurrently filed petition for rehearing en banc.

Arthrex had addressed—in the context of inter partes review (IPR) proceedings—whether APJs had been appointed unconstitutionally by the director of the USPTO, where the director did not have unfettered discretion to remove an APJ. As a result, the Federal Circuit partially invalidated the statutory removal protections of the America Invents Act (AIA) that limited the effect of an APJ severance to give the USPTO independent authority to remove APJs. IPR final written decisions that issued before Arthrex, if timely appealed, could be vacated as unconstitutional and remanded for a new panel of APJs.

The director of the USPTO and Cisco petitioned for rehearing, arguing that while APJs may have been unconstitutionally appointed in their role as APJs in an IPR proceeding, APJs should be deemed constitutionally appointed officers when it comes to their duties in reviewing appeals of inter partes re-examinations. The Federal Circuit disagreed, stating that the various duties of an APJ’s appointment could not be segregated for purposes of the Appointments Clause. Even if they could, the Court could discern no differences between the duties of an APJ in an IPR proceeding as compared to an APJ’s duties in an inter partes examination proceeding. Both proceedings involve third-party challenges to an issued patent, APJs exercise significant authority by issuing final decisions that decide the patentability of the challenged claims, and the USPTO director does not have an independent way of reviewing the final determinations issued by APJs. Finally, like the analysis in Arthrex with respect to the director’s authority to promulgate regulations governing the conduct of inter partes re-examination appeals, provide policy directives and designate opinions as precedential, these types of oversight functions are no different than those considered in Arthrex with respect to IPR proceedings. These functions do not provide the director the necessary oversight over final written decisions to render the APJs constitutionally appointed under the AIA.

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