Denying Rehearing En Banc, the Law Remains That the Appointment of Administrative Patent Judges Under the AIA Violates the Appointments Clause, but That Severance of Employment Protections for APJs Cures the Constitutional Deficiency

Arthrex, Inc. v. Smith & Nephew, Inc., No. 2018-2140 (Fed. Cir. Mar. 23, 2020)

The Federal Circuit denied the parties’ petitions for a panel rehearing and alternatively for a rehearing en banc of a panel decision holding that the appointment of administrative patent judges at the United States Patent and Trademark Office (USPTO) was unconstitutional, letting the panel decision stand.

Judge Moore, who wrote the panel opinion, wrote a concurring opinion joined by fellow panelists Judges Reyna and Chen, along with Judge O’Malley. These four judges agreed that the appointment of APJs violated the Appointments Clause of the Constitution because the Director lacked the requisite control over them. Specifically, APJs are not appointed by the President with the consent of the Senate and the Director lacked the ability to remove them from their positions at will and without cause. Judge Moore argued that the least-disruptive method to cure the constitutional deficiency was to sever the employment protections for the APJs and preserve the remainder of the AIA, with minimal impact to any pending inter partes reviews. The “severance properly retained the portions of the statute necessary to effectuate Congress’ basic objective of providing an agency mechanism where the validity of issued patents may be challenged. Congress ‘would have preferred a Board whose members are removable at will rather than no Board at all.’”

Judge O’Malley also wrote a separate concurrence, joined by Judges Moore and Reyna, to address Judge Dyk’s dissent and its suggestion that the remedy should be retroactive to all prior APJ decisions. Judge O’Malley argued that appellants should be entitled to the same relief of vacatur and remand, but only in pending appeals where Appointments Clause challenges had been preserved. Separately, a total of four judges filed three dissents arguing that the appointments were constitutional and that removing employment protections was not the proper solution if the appointments were unconstitutional. On March 30, the Federal Circuit declined to enter a stay of the decision pending appeal to the Supreme Court.

A copy of the opinion can be found here.