Federal Circuit extends Arthrex ruling to reexaminations
The US Court of Appeals for the Federal Circuit’s controversial Arthrex decision applies to the old inter partes reexamination system, the court has clarified, in a blow for technology company Cisco.
The Federal Circuit ruled last October that an inter partes review involving Arthrex had to be reheard because of a constitutional problem with the way Patent Trial and Appeal Board (PTAB) judges were appointed.
Essentially, the Federal Circuit ruled in Arthrex that PTAB judges were too powerful, partly because their decisions were not subject to review by the director of the US Patent and Trademark Office (USPTO). That meant they should have been appointed by the President and confirmed by the senate, as is constitutionally required for powerful government officials.
The Federal Circuit’s solution was to ‘sever’ statutory protections for PTAB judges, giving the USPTO director the power to remove them from office. This gives the USPTO sufficient oversight over the PTAB judges, known as administrative patent judges (APJs), so that their appointment is no longer subject to senate confirmation.
The USPTO itself objected to this approach, while Arthrex has appealed to the US Supreme Court.
Reexaminations
In the wake of Arthrex, the Federal Circuit sent several inter partes review proceedings back to the PTAB to be reheard by now-constitutionally appointed judges.
But the court also remanded a dispute between Virnetx and Cisco, which stemmed from a different type of patent proceeding.
VirnetX and Cisco were at odds over an inter partes reexamination, which was replaced by inter partes reviews (IPR) in 2012.
The reexamination, requested by Cisco in 2011, found certain claims of a VirnetX patent to be invalid, which was subsequently affirmed on appeal by the PTAB in 2017. But like many IPR proceedings, this decision no longer stands in the wake of Arthrex.
Both Cisco and the USPTO argued that Arthrex shouldn’t apply to inter partes reexamination appeals, and asked the full panel of Federal Circuit judges to revisit the decision en banc.
According to Cisco and the USPTO, PTAB judges should be seen as constitutionally appointed in the context of their duties in reviewing inter partes reexamination appeals.
The USPTO argued that the director of the patent office has more power to make “unilateral” decisions in inter partes reexamination proceedings than they do in IPRs. That would have the effect of limiting the unrestricted power of PTAB judges, and solving the constitutional problem identified in Arthrex.
But the Federal Circuit rejected this approach, citing the way the US Supreme Court has tackled similar issues in the past.
If PTAB judges are unconstitutionally appointed in relation to IPR, then this applies to reexamination proceedings too, the Federal Circuit ruled.
“Both involve third-party challenges to the claims of an issued patent and, importantly, in both, APJs exercise significant authority on behalf of the government by issuing final decisions that decide the patentability of the challenged claims,” it said.
The USPTO director’s power to make “unilateral” decisions in reexaminations also only applies before the case reaches the PTAB, the Federal Circuit said.
For that reason, the court said inter partes reexaminations posed the same problem that arose in Arthrex—the lack of authority of the USPTO director to review APJs’ decisions.
“The director’s authority over the [PTAB’s] decisions is not meaningfully greater in the context of inter partes reexaminations than in inter partes reviews, moreover, because, by statute, only the [PTAB] may grant rehearing in reexaminations, and only a party to the inter partes reexamination, not the director, has the power to appeal the decision to this court,” the decision said.
The case will now be sent back to the PTAB, as several IPRs were in the wake of Arthrex.
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