While all eyes have been trained on the confirmation hearings from last week, the Supreme Court made news in the IP world. The Court granted certiorari in Arthrex v. Smith & Nephew (Nos. 19-1434, -1452, -1458), a decision analyzing the Appointments Clause, U.S. Const. Art. II, § 2, Cl. 2. In Arthrex, a panel of the Federal Circuit held that the statutory scheme for appointing administrative patent judges (APJs) of the Patent Trial and Appeal Board violates the Appointments Clause. Arthrex is an appeal from a final written decision of an inter partes review challenge (IPR) by Smith & Nephew to Arthrex's patent. On appeal, Arthrex challenged the construction of the APJ panel itself, arguing that APJs are “principal officers” under the Appointments Clause and thus should have been appointed by the President directly, with the advice and consent of the Senate. Presently, APJs are appointed by the Secretary of Commerce in consultation with the Director of the PTO, themselves both presidential appointees.

At this point you may be asking, “Why am I reading about a PTAB decision in a Trademark/Copyright Blog?” The answer is that the manner in which the PTO appoints PTAB judges is the same way it appoints TTAB judges, so the reasoning of this decision should apply to the appointments of TTAB ALJs as well. (Congress is considering a bill to circumvent the Appointments Clause problem for TTAB judges in The Trademark Modernization Act of 2020, H.R. 6196.) Arthrex is also a pretty interesting decision in its own right.

Turning back to the Federal Circuit decision, the court determined that APJs are principal officers, who require presidential appointment, rather than “inferior officers,” whom presidential appointees have the power to appoint under the Constitution. Applying the test enunciated in Edmund v. United States, 520 U.S. 651, 664-65 (1997), the Federal Circuit stated that the Director does not have sufficient authority to review APJ decisions, and only limited power to remove an APJ. This lack of review and limited removal authority is indicative of the independence associated with a principal officer, the court found. Holding that APJs are principal officers, the Court then concluded that their current method of appointment violated the Appointments Clause.

The Federal Circuit then considered whether it could sever aspects of the statutory employment scheme for APJs to remove the constitutional defect. It held that it could, and accordingly eliminated the restrictions on removal placed upon the Director, thus changing the balance in favor of holding APJs to be inferior officers.

In granting certiorari, the Supreme Court limited review to the following questions.

1. Whether, for purposes of the Appointments Clause, U.S. Const. Art. II, § 2, Cl. 2, administrative patent judges of the U.S. Patent and Trademark Office are principal officers who must be appointed by the President with the Senate's advice and consent, or “inferior Officers” whose appointment Congress has permissibly vested in a department head.
2. Whether, if administrative patent judges are principal officers, the court of appeals properly cured any Appointments Clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. 7513(a) to those judges.

We expect arguments to be scheduled for early 2021.