Federal Circuit Holds That Delegation Of Director Review In PTAB Proceedings Does Not Violate The Constitution

• Published date: 01 June 2022
• Subject Matter: Intellectual Property, Litigation, Mediation & Arbitration, Patent, Trials & Appeals & Compensation
• Law Firm: Winston & Strawn LLP
• Author: Mr Brian E. Ferguson

Arthrex, Inc. v. Smith & Nephew, Inc., Case No. 2018-2140 (Fed. Cir. May 27, 2022)

Before: Moore, Reyna, Chen

The Arthrex v. Smith & Nephew PTAB saga produced another precedential opinion on May 27, 2022, when the Federal Circuit held that Director review of PTAB Final Written Decisions may be delegated to the Deputy Director or the Commissioner of Patents when the PTO Director is unavailable without violating the Constitution. The Court also held that the PTAB may analyze and resolve the issue of whether a patent specification meets the written description requirement for purposes of resolving the priority date of later-filed claims.

1. Background

This case has an extensive history. In 2015 Arthrex sued Smith & Nephew and ArthroCare Corp. (collectively, "S&N") for infringement of U.S. Patent No. 9,179,907 (the "907 patent"). S&N filed a petition for inter partes review of the 907 patent, which the PTAB instituted. The PTAB panel assigned to the IPR ultimately held in S&N's favor, finding that numerous claims of the 907 patent were invalid as anticipated. Smith & Nephew, Inc. v. Arthrex, Inc., IPR2017-00275 (PTAB May 2, 2018). On appeal to the Federal Circuit, Arthrex argued, among other things, that the make up of the PTAB panels violated the Constitution. Specifically, Arthrex argued that because the Administrative Patent Judges making up the PTAB had the power to invalidate patent claims, they acted as "principal officers" of the United States, but were not appointed by the President and confirmed by the Senate as is required of principal officers. Instead, the APJs were appointed by the Secretary of Commerce. The Federal Circuit agreed and held that the PTAB as it was currently constructed violated the Appointments Clause of the Constitution (Article II, Section 2). The Court's solution was to render APJs "inferior officers," which it did by severing the statutory limitations on the removal of APJs, such that the APJs could be removed by the Director without cause. Having determined that the panel of the PTAB that decided the validity of Arthrex's patent was unconstitutionally appointed, the Federal Circuit remanded to the PTAB for rehearing by a new APJ panel. Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320, 1338, 1340 (Fed. Cir. 2019).

The next stop was the Supreme Court, which vacated and remanded the Federal Circuit's decision. United States v. Arthrex, Inc., 151 S. Ct. 1970 (2021). The Court agreed that the APJs of the PTAB could not invalidate patent claims because they were not appointed by the President and confirmed by the Senate. The Court, however, fashioned a different solution - it held that the PTO Director must have the power to rehear PTAB final written decisions, and, upon review, issue decisions concerning validity. The Court also...