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United States v. Arthrex Inc.

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Supreme Court of the United States
United States v. Arthrex Inc.
Term: 2020
Important Dates
Argument: March 1, 2021
Decided: June 21, 2021
Outcome
Federal Circuit judgment vacated and remanded
Vote
5-4
Majority
Chief Justice John G. Roberts • Samuel Alito • Neil Gorsuch • Brett Kavanaugh • Amy Coney Barrett
Concurring
Neil Gorsuch • Stephen Breyer • Sonia Sotomayor • Elena Kagan
Dissenting
Clarence Thomas • Stephen Breyer • Sonia Sotomayor • Elena Kagan


United States v. Arthrex Inc. is a U.S. Supreme Court case about whether the power of administrative patent judges (APJs) in the U.S. Patent and Trademark Office (PTO) was consistent with the requirements of the Appointments Clause in Article II of the U.S. Constitution.[1] The court ruled that the Appointments Clause does not allow APJs to decide patent disputes without more supervision from higher agency officials. The court also ruled to sever the parts of the patent statute that prevented the director of the PTO from reviewing APJ decisions unilaterally. The three parts of the court's decision attracted different majorities from among the justices.[2]

Chief Justice John Roberts delivered the opinion of the court. Justices Samuel Alito, Neil Gorsuch, Brett Kavanaugh, and Amy Coney Barrett joined parts I and II of his opinion, which held that the director of the PTO improperly lacked direct review power over APJ decisions, giving them power that conflicted with the "design of the Appointments Clause 'to preserve political accountability.'"[2]

Justices Samuel Alito, Brett Kavanaugh, and Amy Coney Barrett joined part III of Roberts' opinion and Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan concurred with the result. In part III, the court blocked enforcement of the patent statute at issue "to the extent that its requirements prevent the Director from reviewing final decisions rendered by APJs."[2]

Justice Neil Gorsuch wrote an opinion concurring in part and dissenting in part. He agreed with the majority opinion about the relation of the Appointments Clause to APJs but rejected the idea that the court had the power to sever, remove, portions of statutes when they violate the constitution.[2]

Justice Stephen Breyer wrote an opinion concurring in part and dissenting in part, joined by Justices Sonia Sotomayor and Elena Kagan. Breyer agreed with parts I and II of Justice Clarence Thomas' dissenting opinion but agreed to go along with the majority's remedy in the case, to make PTAB decisions reviewable by the director of the PTO.[2]

Justice Clarence Thomas wrote a dissenting opinion, joined by Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan in parts I and II, arguing that the court ruled "for the very first time" that "Congress violated the Constitution by vesting the appointment of a federal officer in the head of a department." Thomas argued that neither court precedent nor the Appointments Clause requires the U.S. Senate to confirm officers inferior to two officers below the president.[2]

The case was argued before the Supreme Court of the United States on March 1, 2021, during the court's October 2020-2021 term. The case came on a writ of certiorari to the United States Court of Appeals for the Federal Circuit. It was consolidated with Smith & Nephew Inc. v. Arthrex Inc. and Arthrex Inc. v. Smith & Nephew Inc.[3]

HIGHLIGHTS
  • The case: Arthrex, Inc., challenged the validity of the appointments of the administrative patent judges (APJs) that ruled against it in a patent dispute. The Federal Circuit ruled in favor of Arthrex on appeal, holding that APJs were principal officers of the United States and that their appointment by the Secretary of Commerce violated the Appointments Clause of the U.S. Constitution. To resolve the constitutional issue, the Federal Circuit aimed to make APJs inferior officers by severing their removal protections, making it easier for the Director of the U.S. Patent and Trademark Office to fire them. The U.S. government appealed the decision to the U.S. Supreme Court, arguing that the Federal Circuit was wrong about the APJs' status as principal officers and that they should not have severed their removal protections.
  • The issues:
    "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."[4]
  • The outcome: The U.S. Supreme Court vacated the judgment of the Federal Circuit and remanded the case for further proceedings. The court held that APJs wielded unreviewable powers during inter partes review, powers incompatible with their appointment by the secretary of commerce to an inferior office.[2]


    • Click here to review the lower court's opinion.

    Why it matters: The U.S. Supreme Court ruling preserved the authority of the secretary of commerce to appoint Administrative Patent Judges (APJs) while blocking the enforcement of parts of the patent law that prevented the director of the Patent and Trademark Office from unilaterally reviewing decisions made by APJs. The court's opinion referenced several arguments from the debate surrounding presidential control over other administrative judges throughout the federal government.[2]

    Timeline

    The following timeline details key events in this case:

    • June 21, 2021: The U.S. Supreme Court vacated the judgment of the Federal Circuit and remanded the case for further proceedings.
    • March 1, 2021: The U.S. Supreme Court heard oral argument.
    • October 13, 2020: The U.S. Supreme Court agreed to hear the case.
    • June 30, 2020: Arthrex, Inc. appealed to the U.S. Supreme Court in Arthrex Inc. v. Smith & Nephew Inc.
    • June 29, 2020: Smith & Nephew, Inc. and Arthrocare Corp. appealed to the U.S. Supreme Court in Smith & Nephew Inc. v. Arthrex Inc..
    • June 25, 2020: The United States government appealed to the U.S. Supreme Court in United States v. Arthrex Inc..
    • March 23, 2020: The U.S. Court of Appeals for the Federal Circuit denied a petition for a rehearing.
    • October 31, 2019: The U.S. Court of Appeals for the Federal Circuit vacated and remanded a decision issued by the Patent Trial and Appeal Board, ruling that the appointment method used for the Board's Administrative Patent Judges was unconstitutional.[5]

    Background

    Initial patent dispute goes before Patent Trial and Appeal Board

    Arthrex, Inc. was involved in a patent dispute with two other companies. The other companies challenged the patentability of the things described in Arthrex's patent. Three administrative patent judges (APJs) on the Patent Trial and Appeal Board (PTAB) conducted inter partes review to determine whether Arthrex's patent was valid. The PTAB ruled against Arthrex, ruling that its claims were unpatentable.[5]

    Arthrex appeals to the Federal Circuit, argues APJs improperly appointed

    Arthrex appealed the decision of the PTAB to the Federal Circuit, arguing that the appointment of APJs by the secretary of commerce violates the Appointments Clause in Article II of the U.S. Constitution.[5]

    A three-judge panel ruled in favor of Arthrex, writing that "the statute as currently constructed makes the APJs principal officers," which would require the president to appoint them and the U.S. Senate to confirm them. The panel cited the U.S. Supreme Court decision in Free Enterprise Fund (2009) and decided to sever the "problematic portions [of the law] while leaving the remainder intact." The Federal Circuit held that making the APJs into inferior officers by severing their statutory removal protections remedies the constitutional violation.[5]

    The Federal Circuit ordered the PTAB to select a new panel of properly appointed APJs to rehear Arthrex's case.[5]

    The court denied a petition to rehear the case en banc, before the full court, on March 16, 2020.[1]

    Federal government appeals to the U.S. Supreme Court, argues presidents need not appoint APJs

    The U.S. government appealed the decision of the Federal Circuit to the U.S. Supreme Court, arguing that the Federal Circuit's decision to sever the APJs removal protections was wrong.[1]

    In his petition for certiorari, Solicitor General Noel Francisco argued that the Federal Circuit's decision to invalidate an act of Congress deserved Supreme Court review because its decision found "a constitutional infirmity in the statutory framework that governs more than 200 agency adjudicators, in an agency that administers intellectual-property rights affecting vast swaths of the Nation’s economy." He also argued that the Federal Circuit was wrong to conclude that APJs were principal officers that needed to be appointed by the president and confirmed by the U.S. Senate.[1]

    The U.S. Supreme Court agreed to hear the case on October 13, 2020.[6]

    Appointments Clause

    See also: Article II, United States Constitution

    Article II, Section 2, Clause 2 of the United States Constitution, known as the Appointments Clause, establishes federal appointment authority as follows:

    “ [The President] shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur; and he shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Court of Law, or in the Heads of Departments.[7][8] ”

    Questions presented

    The U.S. Supreme Court granted the petitions for writs of certiorari, consolidated the cases, and specified the following questions presented in a memorandum from the United States government to the court on July 22, 2020.[4]

    Questions presented:
    “ 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. [8]

    		”

    Outcome

    The court ruled 5-4 that the system granting Administrative Patent Judges (APJs) the power to issue final decisions without effective oversight was unconstitutional. The court ruled 7-2 to fix the constitutional issue by severing (removing) the statutory provisions that blocked the director of the Patent and Trademark Office (PTO) from unilaterally reviewing APJ decisions.[2]

    Chief Justice John Roberts delivered the opinion of the court. Justices Neil Gorsuch and Stephen Breyer wrote opinions concurring in part and dissenting in part. Justice Clarence Thomas wrote a dissenting opinion.

    Opinions

    Opinion of the court

    Parts I and II of John Roberts' opinion

    Chief Justice John Roberts delivered the opinion of the court, which vacated the Federal Circuit's ruling. The majority held that Administrative Patent Judges (APJs) exercise power that conflicts with the design of the Appointments Clause in Article II of the U.S. Constitution because APJs wield executive power without effective oversight from the president, which undermines the principle of political accountability.[2]

    Roberts defended his Appointments Clause argument using three main points:[2]

    • No superior executive officers could review final decisions made by APJs.
    • APJs have tenure protection that protects them from being fired by the secretary of commerce.
    • Historical practice suggests that APJs may not exercise unreviewable executive power as inferior officers.

    Roberts argued that Congress gave APJs significant authority to adjudicate the public rights of private parties while insulating their decisions from review. For that reason, the majority held that "the exercise of executive power by inferior officers must at some level be subject to the direction and supervision of an officer nominated by the President and confirmed by the Senate." [2]

    Part III of John Roberts' opinion

    Chief Justice Roberts added a third part to his opinion, joined by Justices Samuel Alito, Brett Kavanaugh, and Amy Coney Barrett. Roberts argued that the Constitution "forbids the enforcement of statutory restrictions on the Director that insulate the decisions of APJs from his direction and supervision." He also wrote that the appropriate remedy in the dispute would be for the acting director of the PTO to decide whether to rehear the patent challenge filed by Smith & Nephew.[2]

    Concurring opinions

    Neil Gorsuch's opinion

    Justice Neil Gorsuch wrote an opinion concurring in part and dissenting in part. He agreed with parts I and II of the majority opinion, discussing the relation of the Appointments Clause to APJs, but he disagreed with part III of Roberts' opinion about what to do about the constitutional violation. Gorsuch rejected the idea that the court had the power to sever, remove, portions of statutes when they violate the constitution. He argued that the court should simply decline to enforce an unconstitutional law in the specific case before it and that severing a part of a law is itself an unconstitutional exercise of legislative power.[2]

    Gorsuch also wrote that the court decided Oil States Energy Services v. Greene's Energy Group (2018) incorrectly by giving the executive branch the power "to strip vested property rights despite a long history in this country allowing only courts that authority."[2]

    Stephen Breyer's opinion

    Justice Stephen Breyer wrote an opinion concurring in part and dissenting in part, joined by Justices Sonia Sotomayor and Elena Kagan. Breyer agreed with parts I and II of Justice Clarence Thomas' dissenting opinion but agreed to go along with the majority's remedy in the case, to make PTAB decisions reviewable by the director of the PTO. He agreed with the remedy because it addressed the specific problem identified by the majority.[2]

    Breyer argued that courts should defer to Congress in cases where Congress gives executive officials appointment powers over inferior officers. He also argued that the director of the PTO already exercised considerable control over patent review decisions that determine policy. Next, Breyer argued that the court should take a functional approach to resolve cases like these, looking at why Congress made the policy choices it did instead of applying "a formalist, judicial-rules-based approach."[2]

    Dissenting opinion

    Justice Clarence Thomas wrote a dissenting opinion, joined by Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan in parts I and II, arguing that the court ruled "for the very first time" that "Congress violated the Constitution by vesting the appointment of a federal officer in the head of a department." Thomas argued that neither court precedent nor the Appointments Clause requires the U.S. Senate to confirm officers inferior to two officers below the president.[2]

    Thomas wrote that he would have left the patent system created by Congress intact instead of changing the review powers of the director of the PTO. He argued that APJs are inferior officers because they are lower in rank than the director of the PTO and the secretary of commerce. In addition, Thomas argued that APJs are functionally lower in rank than those other officers "because they supervise and direct the work administrative patent judges perform.[2]

    Thomas also examined the text, structure, and history of the U.S. Constitution to question court precedent surrounding how to decide whether a federal official is an inferior officer.[2]

    Text of the opinion

    Read the full opinion here.

    Oral argument

    Audio

    • Audio of oral argument:[9]

    Transcript

    • Transcript of oral argument:[10]

    Commentary about the case

    Pre-decision commentary

    This section contains arguments and predictions made by people following the case before the U.S. Supreme Court issued a final decision.

    Prediction after oral argument

    After oral argument concluded, "there was no clear consensus among the justices on how to resolve a dispute that implicates not just patents, but also the Constitution’s separation of powers," according to George Quillin and Jeanne Gills writing for SCOTUSblog.[11]

    Arguments in favor of ruling that Administrative Patent Judges are principal officers

    The New Civil Liberties Alliance (NCLA), a nonprofit organization with a focus on the administrative state, filed an amicus brief that encouraged the U.S. Supreme Court to rule that Administrative Patent Judges (APJs) are principal officers and that the Federal Circuit's decision in the case was unlawful.[12] NCLA made the following arguments:[13]

    • APJs are principal officers who must be appointed by the president with the advice and consent of the U.S. Senate
    • Principal officers are those, like the APJs in question, who issue adjudicative decisions not reviewable by any superior officer
    • The court should draw a clear line between principal and inferior officers to give Congress adequate guidance
    • Questions about the president's removal power have limited relevance in cases about the Appointments Clause
    • The court should not defer to alleged congressional determinations that APJs are inferior officers
    • The Federal Circuit's decision to sever APJs for cause removal protections was unlawful
    • There are significant judicial restraints on a severance remedy
    • The Federal Circuit attempted to remedy the wrong issue
    • Severence is unconstitutional when the court must speculate about several ways Congress might resolve the issue
    • Severing removal protections is inconsistent with the congressional purpose of inter partes review
    • The Federal Circuit's remedy did not solve the Appointments Clause problem because creating the threat of removal does not permit principal officers to review APJ decisions

    Arguments in favor of ruling that Administrative Patent Judges are inferior officers

    Alan B. Morrison, a law professor who co-founded the Public Citizen Litigation Group with Ralph Nader, filed an amicus brief on behalf of a group of administrative, constitutional, and intellectual property law professors arguing that the court should defer to Congress and rule that the Appointments Clause allows the secretary of commerce to appoint APJs.[14] He made the following arguments:[15]

    • APJs are inferior officers under the Appointments Clause
    • Congress set up APJ appointments as though they believed APJs were inferior officers
    • APJs lack the power to issue rules or make policy or commence enforcement proceedings
    • If the court finds that APJs are principal officers, they should reverse the Federal Circuit's decision to strike APJs' for cause removal protections and leave the issue for Congress to resolve
    • Making APJs subject to removal at-will does not resolve whether they were properly appointed
    • The Federal Circuit did not sever an unconstitutional provision, it rewrote two laws in this case

    Post-decision commentary

    This section contains arguments about the case made after the U.S. Supreme Court issued its final decision.

    Ruling increases supervision of APJs, allows people to seek review of their decisions

    The court's ruling means "more than 200 administrative patent judges in the U.S. Patent and Trademark Office must be subject to greater supervision by the agency director in order to comply with the Constitution’s appointments clause," according to attorneys George Quillin and Jeanne Gills, writing for SCOTUSblog.[16]

    They added that the decision "does not overturn rulings by prior panels of administrative patent judges. It merely provides litigants with an opportunity to seek discretionary review by the USPTO director of patent judges’ decision."[16]

    The ruling is "a win against the administrative state"

    The New Civil Liberties Alliance (NCLA), a nonprofit organization with a focus on the administrative state, called the ruling "a win against the Administrative State" and said "the Court underlines once again that Congress cannot empower inferior federal officers to make significant decisions that bind the Executive Branch while also shielding those decisions—and those officers—from review."[17]

    Unclear if decision is "a victory for patent owners"

    "It remains to be seen whether this decision is a victory for patent owners, even if not the one that Arthrex sought. All indicators today suggest not," according to attorney Miranda Y. Jones, in a blog post for the law firm Porter Hedges.[18]

    She wrote, "The more difficult question for appellants of PTAB decisions is whether any such limited remand and PTO Director review would be an illusory win." She also said that "the Acting Director may be inclined to deny all requests for rehearing, in effect rubber stamping the APJs final determinations [...] Such a result would hardly be a victory for anyone."[18]

    Additional reading

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 Supreme Court of the United States, "United States v. Arthrex Inc.: "Petition for a writ of certiorari," June 25, 2020
    2. ↑ 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 2.18 2.19 United States Supreme Court, "United States v. Arthrex, Inc., Opinion of the Court," June 21, 2021
    3. ↑ Smith & Nephew Inc. v. Arthrex Inc. and Arthrex Inc. v. Smith & Nephew Inc. also came on writs of certiorari to the U.S. Court of Appeals for the Federal Circuit. The docket numbers are 19-1452 and 19-1458, respectively.
    4. ↑ 4.0 4.1 Supreme Court of the United States, Smith & Nephew Inc. v. Arthrex Inc.: "Questions presented," accessed October 13, 2020
    5. ↑ 5.0 5.1 5.2 5.3 5.4 U.S. Court of Appeals for the Federal Circuit, Arthrex, Inc. v. Smith & Nephew, Inc., October 31, 2019
    6. ↑ U.S. Supreme Court, "Orders in Pending Cases," October 13, 2020
    7. ↑ Justia, "The Removal Power," accessed October 4, 2018
    8. ↑ 8.0 8.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    9. ↑ Supreme Court of the United States, United States v. Arthrex, Inc., argued March 1, 2021
    10. ↑ Supreme Court of the United States, United States v. Arthrex, Inc., argued March 1, 2021
    11. ↑ SCOTUSblog, "Justices appear conflicted about status of administrative patent judges," March 3, 2021
    12. ↑ New Civil Liberties Alliance, "Mission," accessed January 25, 2021
    13. ↑ Supreme Court of the United States, "U.S. v. Arthrex Inc., Brief of the New Civil Liberties Alliance as Amicus Curiae Urging Reversal in Part and Supporting Respondents in 19-1434 and 19-1452," December 30, 2020
    14. ↑ The George Washington University, "Alan B. Morrison," accessed January 26, 2021
    15. ↑ Supreme Court of the United States, "U.S. v. Arthrex Inc., Brief Amicus Curiae Administrative, Constitutional, and Intellectual Property Law Professors Urging Reversal and Supporting Petitioners," December 2, 2020
    16. ↑ 16.0 16.1 SCOTUSblog, "Justices craft their own remedy for violation of Constitution’s appointments clause," June 21, 2021
    17. ↑ NCLA, "In NCLA Amicus Win, Supreme Court Rules Admin. Patent Judges Are Unconstitutionally Appointed," June 21, 2021
    18. ↑ 18.0 18.1 Porter Hedges, "United States v. Arthrex: Power given to PTAB Patent Judges 'Incompatible' with their Appointment," June 24, 2021
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