USPTO Refusal To Accept Requests For Director Review Of Institution Decisions Not An Appointments Clause Violation

• Published date: 01 September 2022
• Subject Matter: Intellectual Property, Patent, Trademark
• Law Firm: Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
• Author: Shannon Patrick, Troy Viger and Amanda Murphy

Decision: In re Palo Alto Networks, Inc., No. 22-145 (Fed. Cir. 2022) (precedential).

Analysis and Comments

In the most recent Federal Circuit decision addressing the topic of USPTO Director Review, the Federal Circuit held that the Director's "delegation of authority as to whether to institute IPR and PGR proceedings to the [APJs of the Patent Trial and Appeal Board ('PTAB')] and the Director's policy refusing to accept party requests for Director rehearing of decisions not to institute do not violate the Appointments Clause." Id. at *6.

Palo Alto Networks, Inc. ("PAN") filed petitions for IPR and PGR on two patents owned by Centripetal Networks, Inc. While PAN's petitions were pending, the USPTO issued interim guidance stating that the agency "does not accept requests for Director review of decisions on institution." Id. After the PTAB denied institution of PAN's petitions, PAN filed Requests for Director Rehearing seeking review of the non-institution decisions. Id. The USPTO denied these requests, stating that "[a]t this time, the [USPTO] does not accept requests for Director Review of decisions on institution . . . ." Id. PAN then sought a writ of mandamus from the Federal Circuit, compelling the USPTO to accept and consider its Requests for Director Rehearing.

Citing United States v. Arthrex, PAN argued that the USPTO's categorical refusal to accept requests for Director Review of institution decisions violates the Appointments Clause. Id. at *4; 141 S. Ct. 1970 (2021). The Federal Circuit disagreed, noting this case is fundamentally different from Arthrex because, here, there is no statutory or regulatory impediment to the Director's authority to review institution decisions. In re Palo Alto Networks, Inc., 2022 WL 3364832, at *4. The Director has merely delegated her authority regarding institution to the PTAB and "plainly has the authority to revoke the delegation or to exercise her review in individual cases despite the delegation." Id.

The Federal Circuit cited the following passage from Arthrex:

In every respect save the insulation of their decisions from review within the Executive Branch, APJs appear to be inferior officers'an understanding consistent with their appointment in a manner permissible for inferior but not principal officers. . . . If the Director were to have the authority to take control of a PTAB proceeding, APJs would properly function as inferior officers.

Arthrex, 141 S. Ct. at 1986-87. The court noted that while "not...