Fed Circuit rules that PTAB structure is unconstitutional

The US Court of Appeals for the Federal Circuit yesterday, October 31 ruled that the appointment and oversight of the US Patent and Trademark Office (USPTO) patent review judges was unconstitutional, and expanded the powers of the office’s director to resolve the problem.

The court said the case was “exceptional” and dealt with the integrity of the constitutional separation of powers.

In its judgment, the court ruled that the lack of oversight applied to judges of the USPTO’s Patent Trial and Appeal Board (PTAB) means they are “principal officers” under the US constitution.

This would mean that, like other principal officers, administrative patent judges (APJs) should be appointed by the President, subject to confirmation by the Senate.

As a solution, the court granted the USPTO director the power to remove APJs from office.

The court said that the impact of the decision would be limited to cases where final written decisions had been issued, and litigants had raised a constitutional challenge as to how the APJs were appointed.

PTAB judges are appointed by the Secretary of Commerce, in line with the appointment of what are known as “inferior officers”.

Citing the Supreme Court, the Federal Circuit said that “whether one is an ‘inferior’ officer depends on whether he has a superior” who is subject to Presidential oversight.

Under the present law, the authority of the USPTO director to oversee APJs was not sufficient to render them inferior officers, the court said.

“There is no provision or procedure providing the director the power to single-handedly review, nullify or reverse a final written decision issued by a panel of APJs,” the decision read.

At most, the director can convene a panel to determine whether a PTAB case should be reheard by a new panel of three APJs.

The Federal Circuit concluded that the “narrowest viable approach” to solving the constitutional issue was to permit the USPTO director to remove APJs from office at will.

This power would constitute sufficient oversight on the part of the USPTO director to render APJs “inferior officers” who do not need to be appointed by the President, the court said.

The Federal Circuit invoked the doctrine of severability, which allows the court to ‘sever’ a portion of a law which is unconstitutional in order to preserve the remainder of the statute.

In this case, the court severed Title 5 of the US Code as applied to APJs. That statute creates limitations on the Secretary of Commerce and USPTO’s director ability to remove PTAB judges from office.

The court said this approach reflected the intent of Congress: “We are convinced that Congress would preserve the statutory scheme it created for reviewing patent grants and that it intended for APJs to be inferior officers.”

The hearing arose out of an appeal by Arthrex against a PTAB decision which held one of the medical devices company’s patents to be invalid.

The court vacated the PTAB decision in that case and ordered it to be reheard by a new panel.

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