The appointment of PTAB judges is unconstitutional because they are “principal officers” to be appointed by the President with Senate confirmation; but by striking down the “for cause” termination provision, the judges are now “inferior officers” and the remedy is to vacate and remand PTAB decisions to be decided by a now-constitutional panel.
The patentee appealed the Patent Trial and Appeal Board’s (PTAB) invalidation of its patent after an inter partes review (IPR). A panel of three Administrative Patent Judges (APJs) found the patent invalid as anticipated. The patentee argued on appeal that the decision cannot stand because APJs are “principal officers” of the United States who should have been appointed by the President with confirmation by the Senate.
The Federal Circuit vacated the invalidity decision and remanded the IPR to be heard by a new panel, after striking down as unconstitutional the application of a “for cause” removal provision to APJs. The court reached the constitutionality question despite it not having been raised below. It is an “issue of exceptional importance” on which remedial action has not been taken by Congress, and the PTAB could not have corrected the problem in any event. On the merits, APJs are principal “Officers of the United States.” They exercise “significant authority,” and no presidentially appointed officer (here, the Secretary of Commerce and the Director of the Patent Trial Office (PTO) has sufficient power to “review, vacate, or correct” APJ decisions or to remove APJs without cause. This is true even though the Director does exercise sufficient supervisory power over them.
An appropriate remedy would render APJs “inferior officers,” such that their current appointment structure by the Secretary of Commerce would be constitutional. However, doing so by construing the “for cause” removal provision to provide “at will” termination is not a reasonable construction. Nor is there any provision that could be construed as providing the Director unilateral review authority over APJ decisions. Moreover, severing the “three-judge review” concept from the statute “would be a significant diminution in the procedural protections” of IPRs and would be a “radical statutory change.” Instead, the narrowest remedy is to sever the statutory provision that applies a “for cause” termination standard from application to APJs because that application is unconstitutional. With that partial statutory invalidation, APJs are now “inferior officers” and need not be presidentially appointed. Therefore, the court vacated the PTAB decision at issue and remanded the case to be decided by a new, now-constitutional, panel of APJs. Because Appointments Clause challenges can be waived when not presented, this decision applies only to cases where such a challenge to a final written PTAB decision has been made on appeal.
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