Guest Attorney

NAPLES COMPANY ALMOST TOPPLES U.S. PATENT AND TRADEMARK OFFICE

by mark a nieds, esq.

The United States Patent and Trademark Office (USPTO) is part of the Department of Commerce and is tasked with administering the laws related to registration of patents and trademarks, examining patent and trademark applications and issuing registrations. While not a Cabinet position, the Director of the USPTO is an official appointed by the President and confirmed by the Senate. The USPTO also has two quasi-judicial administrative boards, the Patent Trial and Appeal Board (PTAB) and the Trademark Trial and Appeal Board (TTAB). Each of these hear and decide both ex-parte matters, such as an applicant’s appeal of an examiner’s refusal to register a patent or trademark, and inter-partes matters, such as one party’s challenge to the validity of third-party’s patent or a challenge to the registration of a third-party’s trademark. This article focuses only on the PTAB. Proceedings in the PTAB are held in front of three Administrative Patent Judges (APJs). APJs are appointed by the Secretary of Commerce. The PTAB and the APJs are not part of the federal courts. The PTAB is a creature of statute, 35 U.S.C. §6, specifically created by the America Invents Act.

Arthrex patent lawsuit

Naples-based Arthrex, Inc. held a patent on a device used to attach tissue to bone. Arthrex sued, among others, Smith & Nephew, Inc. claiming infringement of that patent. Smith & Nephew then initiated an inter-partes proceeding in the PTAB challenging the validity of Arthrex’s patent. The PTAB ultimately ruled in favor of the defendant and found the patent invalid. Decisions of the PTAB can be appealed to the federal circuit.

On appeal, Arthrex raised a challenge to the APJ system under the Appointments Clause of the Constitution, Art.II, §2, cl. 2, claiming due to the power they held, APJs constituted “principal officers” that must be appointed by the President and confirmed by the Senate. Because the APJs were not appointed in that manner, Arthrex argued such appointments were unconstitutional and the decision of the panel of no effect, meaning the invalidation of Arthrex’s patent was unenforceable. In October 2019, the U.S. Court of Appeals for the Federal Circuit agreed with Arthrex but realized the impact of such a decision would essentially dismantle the entire PTAB. The court devised a fix by finding that a provision stating APJs could only be terminated for cause was unconstitutional. With that provision unconstitutional, APJs could now be terminated at-will by the Director of the USPTO and were no longer “principal officers” subject to Presidential appointment and Senate confirmation. With this constitutional fix in place, the Federal Circuit remanded the case to the PTAB and, ultimately, approximately 100 other similar appeals of PTAB decisions. The case then went to the Supreme Court on the specific issue of whether the authority of the APJs to issue decisions was consistent with the Appointments Clause. United States v. Arthrex, 594 U.S. ____ (2021), Slip Op. 2.

Supreme Court Opinion

On June 21, 2021, in a fractured opinion, the Court found the answer as “no” without answering the specific question. The majority opinion found “the unreviewable authority wielded by APJs during interpartes review is incompatible with their appointment by the Secretary [of Commerce] to an inferior office.” Slip Op. 18-19.

Without dismantling the entire PTAB, the Court found its own fix to the solution by rendering a different part of the statute unconstitutional. The Court invalidated a provision that prevented the Director of the USPTO from reviewing PTAB decisions. Rendering the decision reviewable by the Director placed the APJs inferior to the Director and thus did not implicate the Appointments Clause in the first instance. The Court then remanded the case to the USPTO Director for the Director to determine whether to rehear the matter.

Post-Arthrex, there is now a mechanism and procedure in place for the USPTO Director review of PTAB decisions. Only time will tell, however, if this review will be more than a cursory, rubber-stamp review, or beneficial to patent owners.

Mark Nieds is chair of Henderson Franklin’s Intellectual Property Practice Group. Drawing on two decades of experience, he represents clients in the acquisition and protection of copyrights, trademarks and trade secrets. Mark also advises clients on privacy and data security, providing strategies to manage risk and ensure legal compliance with the gathering and use of personal information. Mark may be reached at mark.nieds@henlaw.com or by phone at 239.344.1153.