Arthrex: who are you calling inferior?

On October 13, the US Supreme Court granted certiorari in Arthrex v Smith & Nephew, (case numbers 19-1434, -1452, and -1458). Accordingly, the Supreme Court will now consider whether the Patent Trial and Appeal Board’s (PTAB’s) administrative patent judges (APJs) were unconstitutionally appointed.

What does the case concern?

The US Constitution requires that “Officers of the United States” be appointed by the President “with the advice and consent of the Senate”. An exception is made for “inferior officers”, who may be appointed without senate oversight and by either the President, courts of law, or heads of departments, as chosen by Congress.

Therefore, the constitutionally correct procedure for installing a federal officer depends on whether the officer is an “inferior” (in which case they may be appointed by a party chosen by Congress) or whether the officer is what courts have come to call a “principal” (in which case they must be appointed by the President with the Senate’s advice and consent).

Unfortunately, the Constitution provides little guidance on how to differentiate between principal and inferior officers. Case law provides some guidance.

The constitutionality of various federal officials’ appointment has been challenged over the years, resulting in the enumeration of several relevant factors. See, eg, Morrison v Olson (1988)—determining that members of an “independent counsel” appointed to investigate and, if appropriate, prosecute certain high-ranking government officials for violations of federal criminal laws were “inferior” officers because they were subject to removal by the attorney general, performed limited duties, and had limited jurisdiction and tenure.

Despite these factors, there is still no bright line between principal and inferior officers.

In October 2019, the US Court of Appeals for the Federal Circuit ruled in Arthrex v Smith & Nephew that the APJs who oversee inter partes review proceedings hold office in violation of the Appointments Clause.

The court held that APJs are principal rather than inferior officers due to “the lack of any presidentially-appointed officer who can review, vacate, or correct their decisions” and the secretary’s “limited removal power”.

Attempting to fix what the Federal Circuit deemed a constitutional violation, the court severed the APJs’ removal protections under 5 USC section 7513(a), purportedly rendering the APJs inferior rather than principal officers, and remanded the case for a new hearing.

The appeal

Arthrex, Smith & Nephew, and the US government each petitioned for certiorari. Dozens of other parties impacted by the decision—directly and indirectly—have also filed en banc and certiorari petitions since, seeking review of key holdings in the case.

In a July 22, 2020, memorandum to the Supreme Court, the government summarised the various proceedings and identified a common set of three core questions.

Although many issues were raised in the briefing for the multiple appeals, the Supreme Court specifically identified two questions for its consideration: (1) whether APJs 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; and (2) if APJs are principal officers, whether the Federal Circuit properly cured any Appointments Clause defect by severing the application of 5 USC section 7513(a) to those judges.

The court did not grant certiorari on the third question the government presented: whether the Federal Circuit had erred by adjudicating an Appointments Clause challenge that had not been presented to the agency.

What’s next?

Based on a typical schedule, the opening brief will be due around the end of November and briefing will continue into January 2021. The Supreme Court oral argument for this matter will likely be held in February or March 2021, with a decision by term’s end in June 2021.

All cases remanded under Arthrex are currently stayed at the PTAB until the Supreme Court settles the appointments issue.

The Supreme Court has now decided to weigh in on these questions of broad interest to both patent and administrative law. And it is unclear what direction the court will go at this point.

If the court disagrees with the Federal Circuit’s determination that APJs are principal officers, then their removal protections can be restored and the “inferior officers” (now so designated) can go back to business as usual.

On the other hand, if the court agrees with the Federal Circuit that APJs are principal officers, it will also have to consider what, if any, remedy it can provide.

While the court could choose to uphold the Federal Circuit’s remedy—severing APJ removal protections—it could choose some other way to make the APJs inferior. Or the court could do nothing at all to remedy the Appointments Clause violation, effectively requiring the other branches of government to solve the problem.

Given the array of possible outcomes, there can only be speculation going forward until a decision next year. Whatever the court decides, its decision will impact many cases that the Federal Circuit has remanded to the PTAB for a new hearing and will, hopefully, shed additional light on this murky area of constitutional law.

This article is for informational purposes and is not intended to constitute legal advice. The opinions expressed herein are the authors’ alone, and not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, or the firm’s clients.

Jason Romrell is a partner at Finnegan, Henderson, Farabow, Garrett & Dunner. He can be contacted at: jason.romrell@finnegan.com

Derek McCorquindale is a partner at Finnegan, Henderson, Farabow, Garrett & Dunner. He can be contacted at: derek.mccorquindale@finnegan.com

Brandon Andersen is an associate at Finnegan, Henderson, Farabow, Garrett & Dunner. He can be contacted at: brandon.andersen@finnegan.com

Image: Shutterstock.com / S-F