On June 18, 2020, the Federal Circuit granted JHO Intellectual Property Holdings, LLC’s (“JHO”) motion to vacate the PTAB’s final written decision and remand the case in light of the court’s decision in Arthrex. In an ex parte reexamination proceeding, the PTAB denied JHO’s request for rehearing of its decision affirming the Examiner’s rejections of all pending claims of JHO’s U.S. Patent No. 8,445,466.

In its motion, JHO argued that Arthrex applies because the duties of administrative patent judges (“APJs”) are similar in both inter partes review (“IPR”) and ex parte reexamination proceedings. JHO argued that in both proceedings APJs hear oral argument, review pro hac admissions and issue final written decisions containing fact findings and legal conclusions relating to the patentability of the claims at issue. JHO also argued that in ex parte reexamination when the APJs issue a final written decision the only recourse available is to appeal the decision to the Federal Circuit.

The USPTO argued that the issue of constitutional appointment of APJs is not present for ex parte reexamination proceedings because the Director has substantially greater control over such proceedings and may make unilateral decisions concerning the examination of the claims at issue. The Federal Circuit rejected the USPTO’s argument and relying on its reasoning in VirnetX Inc. v. Cisco Systems, Inc., instead held that Arthrex applied in the context of ex parte reexaminations.

Last month, in VirnetX Inc. v. Cisco Systems, Inc., 958 F.3d 1333 (Fed. Cir. May 13, 2020), the Federal Circuit denied the USPTO and Cisco Systems, Inc.’s petitions for rehearing and again held that Arthrex applied to inter partes reexaminations. The USPTO had argued that APJs should at least be considered constitutionally appointed officers when it comes to hearing appeals of inter partes reexaminations. Relying on Freytag v. Commissioner, 501 U.S. 868 (1991), the Federal Circuit held that they “look not only to the authority exercised in [an appellant]’s case but to all of that appointee’s duties when assessing an Appointments Clause challenge.” See id. at 1335. According to the Federal Circuit, if in light of Arthrex, APJs are unconstitutionally appointed principal officers with respect to their duties in IPRs, then under Freytag, “vacatur would be appropriate for all agency actions rendered by those APJs regardless of the specific type of review proceeding on appeal.” Id. However, the Federal Circuit noted that although Freytag would appear to apply to all Board proceedings, it declines to go that far. The Federal Circuit held that the analysis applies here to appeals of inter partes reexaminations because they are similar to IPRs in that both involve “third-party challenges to the claims of an issued patent” and in both “APJs exercise significant authority on behalf of the government by issuing final decisions that decide the patentability of the challenged claims.” Id.

Applying this reasoning to the present case, the Federal Circuit held that although the appeal arises out of an ex parte reexamination, there is no relevant distinction between that proceeding and an inter partes reexamination proceeding such that the reasoning of Virnetx should not apply.

Conclusions

The Federal Circuit’s decision here joins a long line of recent decisions issued in response to Arthrex. We previously reported on some of these decisions here. We can expect to see more Federal Circuit decisions analyzing the boundaries and applications of Arthrex in the near future. However, because the PTAB issued an order suspending all activity in the remanded cases, the PTAB will not be issuing any decisions until the Supreme Court decides the issue.

Earlier this month, the U.S. government, Smith & Nephew, Inc. and ArthroCare Corp. filed briefs in opposition to Arthrex’s petition for certiorari. Arthrex submitted its reply brief on June 19, 2020. The Supreme Court is set to discuss the briefs at conference on September 29, 2020.

The Supreme Court also already considered three other petitions for certiorari raising the same issue: Collabo Innovations, Inc. v. Sony Corp., No. 19-601 (filed Nov. 4, 2019); Celgene Corp. v. Peter, No. 19-1074 (filed Feb. 26, 2020); and Enzo Life Sciences, Inc. v. Becton, Dickinson & Co., No. 19-1097 (filed Mar. 3, 2020). On June 22, 2020, the Supreme Court denied all three petitions. It is worth noting that the questions presented in each of these petitions did not directly address the constitutional appointment of APJs. Rather, the appointment issue was merely hinted at or noted somewhere in the petition. As such, the Supreme Court may not have analyzed the merits of the issue when deciding those three petitions.

Thus, until the Supreme Court makes a decision in September, the Federal Circuit will have to continue to navigate the minefield of appeals left behind by Arthrex while the rest of the patent world waits.