The Court of Appeals for the Federal Circuit (“Federal Circuit”) has issued an important decision affecting inter partes review (“IPR”) and possibly other cases decided by the Patent Trial and Appeal Board (“PTAB”). The decision vacated a PTAB decision in an IPR because the process for appointing PTAB judges was unconstitutional. Final written decisions by the PTAB still subject to appeal may be impacted by the ruling.
In Arthrex, Inc. v. Smith & Nephew, Inc., the Federal Circuit held that the process by which the Administrative Patent Judges (“APJs”) who decide IPRs are appointed is unconstitutional. Arthrex appealed an unfavorable PTAB final written decision on the basis that the APJs that issued the decision are “principal officers” of the United States that must be nominated by the President and confirmed by the Senate under the Constitution. Because APJs are appointed by the Secretary of Commerce, Arthrex argued that their appointment was improper, and, thus, their final written decision was invalid. Arthrex had not made this constitutional argument to the PTAB; Arthrex raised the argument for the first time on appeal.
The Federal Circuit agreed with Arthrex, vacated the PTAB’s final written decision, and remanded with an order that the PTAB decide the case again with a different panel of APJs. The Federal Circuit also partially invalidated a portion of the statute related to APJ appointments to remedy the constitutional violation for future PTAB final written decisions.
Significantly, the Federal Circuit found that Arthrex had not waived its constitutional argument by raising it for the first time on appeal. However, the Federal Circuit has subsequently held that this constitutional argument must be presented in or before the appealing party’s opening appeal brief. A practical effect of the Federal Circuit’s decision is that the losing party in a previously issued PTAB final written decision may seek, in or before its opening appeal brief, to have the decision vacated and decided again by a different PTAB panel. Further effects of the Arthrex decision, including whether the decision will be challenged further and whether the decision will be extended to apply to other PTAB proceedings, such as ex parte appeals, will continue to unfold.