No. 19-1434
`
`In the
`Supreme Court of the United States
`
`UNITED STATES OF AMERICA,
`
`v.
`
`ARTHREX, INC., et al.,
`
`Petitioner,
`
`Respondents.
`
`On PetitiOn FOr a Writ OF CertiOrari tO the United
`StateS COUrt OF aPPealS FOr the Federal CirCUit
`
`BRIEF OF ASKELADDEN L.L.C. AS AMICUS
`CURIAE IN SUPPORT OF PETITIONER
`
`Charles r. MaCedo
`Counsel of Record
`davId P. GoldberG
`Chandler sturM
`aMster rothsteIn & ebensteIn LLp
`90 park Avenue
`New York, New York 10016
`(212) 336-8000
`cmacedo@arelaw.com
`
`Counsel for Amicus Curiae
`Askeladden L.L.C.
`
`297359
`
`A
`
`(800) 274-3321 • (800) 359-6859
`
`
`
`In the
`Supreme Court of the United States
`
`UNITED STATES OF AMERICA,
`
`v.
`
`ARTHREX, INC., et al.,
`
`Petitioner,
`
`Respondents.
`
`On PetitiOn FOr a Writ OF CertiOrari tO the United
`StateS COUrt OF aPPealS FOr the Federal CirCUit
`
`BRIEF OF ASKELADDEN L.L.C. AS AMICUS
`CURIAE IN SUPPORT OF PETITIONER
`
`Charles r. MaCedo
`Counsel of Record
`davId P. GoldberG
`Chandler sturM
`aMster rothsteIn & ebensteIn LLp
`90 park Avenue
`New York, New York 10016
`(212) 336-8000
`cmacedo@arelaw.com
`
`Counsel for Amicus Curiae
`Askeladden L.L.C.
`
`297359
`
`A
`
`(800) 274-3321 • (800) 359-6859
`
`
`
`
`
` i
`
`
`
`
`QUESTIONS PRESENTED
`
`1. Whether, for purposes of the Appointments
`Clause, U.S. CONST. art. II, § 2, Cl. 2, administrative
`patent judges of the U.S. Patent and Trademark
`Office 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.
`
`2. Whether the court of appeals erred by
`adjudicating an Appointments Clause challenge
`brought by a litigant that had not presented the
`challenge to the agency.
`
`
`
`
`
`
`
`
`
`
`
`ii
`
`
`TABLE OF CONTENTS
`
`QUESTIONS PRESENTED ........................................ i
`
`TABLE OF CONTENTS ............................................. ii
`
`TABLE OF AUTHORITIES ...................................... iii
`
`INTEREST OF AMICUS CURIAE ............................ 1
`
`SUMMARY OF ARGUMENTS .................................. 3
`
`ARGUMENT ..................................................................... 6
`
`I. The Federal Circuit Erred in Concluding
`That PTAB APJs Are “Principal” Officers
`Under the Appointments Clause .................. 6
`
`II. This Is an Important Issue That This
`Court Should Address ................................. 14
`
`III. Answering the U.S. Government’s First
`Question Can Potentially Resolve All
`Issues Raised by the Erroneous Federal
`Circuit Decision ........................................... 18
`
`IV. There Are Good Reasons Not to Wait for
`Another Case to Remedy This Error .......... 21
`
`CONCLUSION .......................................................... 25
`
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`
`iii
`
`
`
`
`Cases:
`
`TABLE OF AUTHORITIES
`
`Arthrex, Inc. v. Smith & Nephew Inc.,
`No. 2018-2140 (Fed. Cir. Oct. 31, 2019), reh’g
`en banc denied (Fed. Cir. Mar. 23, 2020) ......2, 3, 5
`
`Bedgear, LLC v. Fredman Bros. Furniture Co.,
`783 F. App’x 1029 (Fed. Cir. 2019) ..................... 16
`
`BioDelivery Scis. Int’l, Inc. v.
`Aquestive Therapeutics Inc.,
`935 F.3d 1362 (Fed. Cir. 2019) ............................ 12
`
`Blodgett v. Holden,
`275 U.S. 142 (1927) ............................................. 14
`
`Buckley v. Valeo,
`424 U.S. 1 (1976) ................................................... 8
`
`Caterpillar Paving Prods. Inc. v.
`Wirtgen Am., Inc.,
`957 F.3d 1342 (Fed. Cir. May 6, 2020) ............... 19
`
`Cuozzo Speed Techs. LLC v. Lee,
`136 S. Ct. 2131 (2016) ......................................... 15
`
`Customedia Techs. v. Dish Network,
`941 F.3d 1174 (Fed. Cir. Nov. 1, 2019),
`reh’g and reh’g en banc denied
`(Fed. Cir. Mar. 5, 2020) ....................................... 19
`
`Edmond v. United States,
`520 U.S. 651 (1997) ...................................... passim
`
`
`
`
`
`
`
`iv
`
`
`Free Enter. Fund v.
`Pub. Co. Accounting Oversight Bd.,
`561 U.S. 477 (2010) ...................................... 7-8, 13
`
`Freytag v. Commissioner,
`501 U.S. 868 (1991) ............................................... 8
`
`Humphrey’s Ex’r v. United States,
`295 U.S. 602 (1935) ................................ 5, 6, 20, 21
`
`Iancu v. Brunetti,
`139 S. Ct. 2294 (2019) ......................................... 15
`
`In re Alappat,
`33 F.3d 1526 (Fed. Cir. 1994) .............................. 14
`
`In re Boloro Global Ltd.,
`Nos. 2019-2349, -2351, -2352
`(Fed. Cir. July 7, 2020) ........................................ 17
`
`In re Hennen,
`38 U.S. 230 (1839) ................................................. 8
`
`In re JHO Intellectual Prop. Holdings LLC,
`No. 2019-2330 (Fed. Cir. June 18, 2020) ............ 17
`
`Lucia v. SEC,
`138 S. Ct. 2044 (2018) ........................................... 7
`
`Matal v. Tam,
`137 S. Ct. 1744 (2017) ......................................... 15
`
`Morrison v. Olson,
`487 U.S. 654 (1988) ............................................... 8
`
`Myers v. United States,
`272 U.S. 51 (1926) ................................................. 8
`
`
`
`
`
`
`
`
`
`
`
` v
`
`
`
`Nidec Motor Corp. v.
`Zhongshan Broad Ocean Motor Co. Ltd.,
`868 F.3d 1013 (Fed. Cir. 2017), cert. denied,
`138 S. Ct. 1695 (Apr. 30, 2018) ........................... 14
`
`Oil States Energy v. Greene’s Energy Grp.,
`138 S. Ct. 1365 (2018) ........................ 10, 12, 14, 15
`
`Phillips v. AWH Corp.,
`415 F.3d 1303 (Fed. Cir. 2005) ............................ 11
`
`Polaris Innovations Ltd. v. Kingston Tech. Co.,
`No. 2018-1831 (Fed. Cir. Jan. 31, 2020) .... 3, 18, 21
`
`Sanofi-Aventis Deutschland GmbH v.
`Mylan Pharms.,
`791 F. App’x 916 (Fed. Cir. Nov. 19, 2019) .... 18-19
`
`SAS Inst. Inc. v. Iancu,
`138 S. Ct. 1348 (2018) ......................................... 15
`
`Seila Law LLC v. Consumer Fin. Prot. Bureau,
`No. 19-7 (U.S. June 29, 2020) ............................... 9
`
`Smith & Nephew, Inc. v. Arthrex, Inc.,
`No. 19-1452 (U.S. filed June 29, 2020) ............... 10
`
`Thryv, Inc. v. Click-to-Call Techs., LP,
`140 S. Ct. 1367 (2020) .............................. 11, 15, 21
`
`United States v. Arthrex, Inc.,
`No. 19-1434 (U.S. filed June 25, 2020) ................. 9
`
`VirnetX Inc. v. Cisco Sys. Inc.,
`958 F.3d 1333 (Fed. Cir. May 13, 2020) ............. 17
`
`
`
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`
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`
`
`
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`
`
`vi
`
`
`Statutes and Other Authorities:
`
`U.S. CONST. amend. I ................................................ 15
`
`U.S. CONST. art. II, § 2, cl. 2 ................................... 3, 6
`
`U.S. CONST. art. III ........................................ 11, 15, 23
`
`15 U.S.C. § 1501 ........................................................ 10
`
`35 U.S.C. § 1(a) ......................................................... 10
`
`35 U.S.C. § 3(a) ......................................................... 10
`
`35 U.S.C. § 3(b)(6) ..................................................... 10
`
`35 U.S.C. § 3(c) .......................................................... 13
`
`35 U.S.C. § 314 .......................................................... 11
`
`35 U.S.C. § 316(a) ..................................................... 11
`
`35 U.S.C. § 6(a) ........................................ 10, 13, 14, 24
`
`35 U.S.C. § 6(c) .....................................................12, 14
`
`5 U.S.C. § 7513(a) ..................................................... 13
`
`77 Fed. Reg. 48612 (Aug. 14, 2012) .......................... 11
`
`77 Fed. Reg. 48756 (Aug. 14, 2012) .......................... 11
`
`83 Fed. Reg. 51340 (Oct. 11, 2018) ........................... 11
`
`84 Fed. Reg. 9497 (Mar. 15, 2019)............................ 11
`
`2019 Revised Patent Subject Matter Eligibility
`Guidance, 84 Fed. Reg. 50 (Jan. 7, 2019) ...... 12-13
`
`Consolidated Trial Practice Guide (Nov. 2019) ....... 11
`
`H.R. Rep. No. 112-98 (2011) ..................................... 15
`
`
`
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`
`vii
`
`
`John F. Duffy, Are Administrative Patent Judges
`Constitutional?, 2007 PATENTLY-O PATENT
`L.J. 21 (2007) ....................................................... 23
`
`Leahy-Smith America Invents Act, Pub. L.
`No. 112-29, 125 Stat. 284 (2011) ........................... 7
`
`Patent and Trademark Administrative Judges
`Appointment Authority Revision, Pub. L. 110-
`313, 122 Stat. 3014 (2008) .............................. 23-24
`
`Patent Trial and Appeal Board Standard
`Operating Procedure 2 (Revision 10) .................. 12
`
`S. Rep. No. 110-259 (2008) ....................................... 15
`
`Sup. Ct. R. 37.2(a) ....................................................... 1
`
`Sup. Ct. R. 37.6 ........................................................... 1
`
`The Patent Trial and Appeal Board and the
`Appointments Clause: Implications of Recent
`Court Decisions, U.S. HOUSE COMMITTEE ON
`THE JUDICIARY (Nov. 19, 2019) ............................ 24
`
`Trial Statistics: IPR, PGR, CBM, UNITED STATES
`PATENT AND TRADEMARK OFFICE (Nov. 2019) .... 17
`
`United States Court of Appeals for the Federal
`Circuit: Appeals Filed, Terminated, and
`Pending, UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT (2019) ........................ 17
`
`
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`INTEREST OF AMICUS CURIAE
`
`Askeladden L.L.C. (“Askeladden”) is a wholly
`owned subsidiary of The Clearing House Payments
`Company L.L.C. (“TCH”). Since its founding in 1863,
`TCH has delivered safe and reliable payments
`systems, facilitated bank-led payments innovations,
`and provided
`thought
`leadership on strategic
`payments issues.1
`
`is the only private sector
`Today, TCH
`automated clearing house (“ACH”) and wire operator
`in the United States, clearing and settling nearly $2
`trillion in U.S. dollar payments each day, representing
`half of all commercial ACH and wire volume. TCH
`continues to leverage its unique capabilities to
`support bank-led innovation, including launching the
`RTP® network, a real-time payment system that
`modernizes core payments capabilities for all U.S.
`financial institutions. As the country’s oldest banking
`trade association, TCH also provides
`informed
`advocacy and
`thought
`leadership on
`critical
`payments-related issues facing financial institutions
`today. TCH is owned by 24 financial institutions and
`supports hundreds of banks and credit unions through
`its core systems and related services.
`
`
`1 Pursuant to Sup. Ct. R. 37.6, Askeladden affirms that no
`counsel for a party authored this brief in whole or in part, and no
`one other than Askeladden or its counsel made a monetary
`contribution to fund the preparation or submission of this brief.
`Pursuant to Rule 37.2(a), counsel of record for all parties received
`notice of Askeladden’s intention to file this brief. Additionally, all
`parties have consented to the filing of this amicus curiae brief.
`
`
`
`
`
`
`
`
`
`
`
`
` 2
`
`the Patent Quality
`founded
`Askeladden
`Initiative (“PQI”) as an education, information, and
`advocacy effort to improve the understanding, use,
`and reliability of patents in financial services and
`elsewhere.
`
`Through PQI, Askeladden strives to improve
`the patent system by challenging the validity of low-
`quality patents and by promoting improved patent
`holder behavior, while also supporting effective
`intellectual property practices and
`improved
`innovation rights. To that end, Askeladden regularly
`files amicus briefs in cases presenting important
`issues of patent law.
`
`Askeladden and the entire financial services
`industry, as regular participants in IPR proceedings,
`have a very strong interest in the issues presented in
`this case. In short, it is critical to the integrity of the
`patent review process and of the whole patent system
`that this Court clarify the status of the administrative
`patent judges (“APJs”) who hear inter partes reviews
`(“IPR”) and other post-issuance hearings before the
`Patent Trial and Appeal Board (“PTAB”).
`
`To date, as a result of the erroneous
`determination by the Arthrex panel below that APJs
`were unconstitutionally appointed prior to October 31,
`2020, havoc and confusion have occurred, resulting in
`over 100 otherwise unassailable
`final written
`decisions by the PTAB being summarily vacated and
`remanded to be reheard unnecessarily, the wasting of
`valuable party and court resources in litigating
`collateral issues with respect to the Appointments
`Clause and/or waiver of the Appointments Clause
`instead of focusing on the merits of the actual dispute
`
`
`
`
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`
` 3
`
`between the parties, and now the questioning of other
`actions taken by the PTAB APJs in their roles in non-
`IPR proceedings.
`
`SUMMARY OF ARGUMENTS
`
`I. The Federal Circuit erred in concluding that
`PTAB APJs are “principal” officers under the
`Appointments Clause.
`
`On October 31, 2019, in Arthrex, Inc. v. Smith
`& Nephew, Inc., No. 18-2140 (Fed. Cir. Oct. 31, 2019)
`(Pet. App. A, “Arthrex I”), a three-judge panel of the
`U.S. Court of Appeals for the Federal Circuit (“Federal
`Circuit”) took the remarkable step of declaring that
`“the statute [Title 35, “the Patent Act”] as currently
`constructed makes the APJs principal officers” and
`were thus appointed in violation of the Appointments
`Clause of the U.S. Constitution, U.S. CONST. art. II, §
`2, cl. 2. See Pet. App. at 1a–2a. Since then, the Federal
`Circuit
`in over 100 cases,
`including Polaris
`Innovations Ltd. v. Kingston Tech. Co., No. 2018-1831
`(Fed. Cir. Jan. 31, 2020) (Pet. App. B), has continued
`to apply Arthrex I to summarily vacate, reverse, and
`remand final written decisions of the PTAB APJs in
`IPRs issued on or before October 31, 2020, despite
`Circuit Judges Dyk’s, Newman’s, Wallach’s and
`Hughes’ disagreement with this precedent. See, e.g.,
`Arthrex, Inc. v. Smith & Nephew Inc., No. 2018-2140
`(Fed. Cir. Oct. 31, 2019), reh’g en banc denied (Fed.
`Cir. Mar. 23, 2020) (“Arthrex II”) (Dyk, Newman,
`Wallach, Hughes, JJ., dissenting) (Pet. App. H).
`
`Arthrex I’s conclusion that the PTAB APJs are
`“principal” officers was wrong. While this Court’s
`precedent makes clear that PTAB APJs are “officers”
`
`
`
`
`
`
`
`
`
` 4
`
`of the U.S. since they “exercise significant authority,”
`none of the decisions of this Court relied upon in
`Arthrex I found an administrative judge to be a
`“principal” officer. Rather, each of this Court’s
`decisions cited merely held that the official in question
`was an “inferior” officer.
`
`The touchstone of whether an officer is a
`“principal” officer rather than an “inferior officer” is
`whether the officer’s “work is directed and supervised
`at some level by others who were appointed by
`presidential nomination with the advice and consent
`of the Senate.” Edmond v. United States, 520 U.S.
`651, 663 (1997). Rather than follow Edmond’’s
`admonition that “[o]ur cases have not set forth an
`exclusive
`criterion
`for distinguishing between
`principal and inferior officers for Appointment Clause
`purposes,” Arthrex I cherry-picked the facts from
`Edmond to establish a three-factor test to be tallied
`and mechanically applied. This is clear error, and
`needs to be addressed by this Court.
`
`II. This is an important issue impacting many
`cases.
`
`Because the lower court invalidated an Act of
`Congress, it is important for this Court to ensure that
`this significant outcome was the correct one. This is
`especially true in a case like this one, which impacts a
`large number of stakeholders and will impact a large
`part of the Nation’s economy.
`
`III. Arthrex I and Polaris are the right vehicle
`to decide the issue.
`
`
`
`
`
`
`
`
`
` 5
`
`This Court will surely be inundated with
`petitions from parties to cases in which the Federal
`Circuit found Arthrex challenges to apply, parties to
`cases in which the Federal Circuit found Arthrex
`challenges to be waived, and parties to proceedings
`where the Federal Circuit found Arthrex challenges
`not to apply. Unless and until this Court provides
`guidance, these petitions are unlikely to abate.
`
`the U.S. Government, Askeladden
`Like
`respectfully submits that, in the first instance, it
`would be best for this Court to address the first
`question presented by the Government and confirm
`that APJs of the PTAB are merely “inferior officers” of
`the U.S. and thus were constitutionally appointed.
`Therefore, severance of Title 5 “without cause” rights
`is not necessary, the prior decisions can be reinstated,
`and any appeals to the Federal Circuit can be properly
`reviewed on the merits.
`
`If the Court determines that Arthrex I erred in
`concluding that PTAB APJs were “principal” officers
`for purposes of the Appointments Clause, then all the
`chaos that has ensued will promptly be eliminated.
`There is no dispute that Congress properly set forth a
`procedure under Section 6 of the Patent Act to appoint
`PTAB APJs assuming, as Congress and everyone else
`did, that PTAB APJs are “inferior” officers. Only if the
`Court agrees with Arthrex I that PTAB APJs (at least
`prior to October 31, 2019) were “principal” officers,
`would it be necessary to address other issues like
`waiver and severance, or potential Humphrey’s
`Executor-type claims from APJs terminated without
`cause. See, e.g., Humphrey’s Ex’r v. United States, 295
`
`
`
`
`
`
`
`
`
` 6
`
`U.S. 602 (1935) (claim for lost wages after removal
`without cause).
`
`IV. Waiting for another case to present the
`question will serve no useful purposes.
`
`Despite the fact that one-third of the Federal
`Circuit’s bench believes that Arthrex I was wrongly
`decided, there will be no more debate in the lower
`courts on this issue, as the Federal Circuit denied
`requests for rehearing by all parties to the proceeding.
`In addition, waiting for another case to present the
`question will cause untold harm to the PTAB as an
`institution, its over 250 APJs, the parties practicing
`before the PTAB, and the present and potentially
`future litigants who will need to address the delay in
`determining the fate of the over 100 patents involved
`in the remand decisions. Further, Congress has been
`stymied by Arthrex I due to the lack of guidance from
`the full Federal Circuit or this Court as to the proper
`way to resolve the problem that it thought had been
`resolved years ago.
`
`ARGUMENT
`
`The Federal Circuit Erred in Concluding That
`I.
`PTAB APJs Are “Principal” Officers Under the
`Appointments Clause
`
`On October 31, 2019, in Arthrex I, a three-judge
`panel of the U.S. Court of Appeals for the Federal
`Circuit took the remarkable step of declaring that the
`Patent Act “as currently constructed makes the APJs
`principal officers” who were appointed in violation of
`the Appointments Clause of the U.S. Constitution,
`U.S. CONST., art. II, § 2, cl. 2. See Pet. App. at 1a–2a.
`
`
`
`
`
`
`
`
`
` 7
`
`To remedy this constitutional defect, the panel
`severed by application the portion of the Patent Act
`restricting removal of the APJs only “for cause,” thus
`purportedly rendering APJs “inferior officers” going
`forward
`and
`remedying
`the
`constitutional
`appointment problem. Id. at 27a–28a. Since the
`decision, the Federal Circuit has applied Arthrex I in
`over 100 cases, including Polaris, to summarily
`vacate, reverse and remand final written decisions of
`the PTAB in IPRs issued on or before October 31,
`2020. See, e.g., id. at 34a–35a.
`
`Because they “exercise significant authority,”
`there is no dispute that PTAB APJs are “officers of the
`United States.” Id. at 7a–8a; see also Edmond, 520
`U.S. at 662. Instead, the issue below was whether
`APJs are “principal” officers, requiring appointment
`by the President with the advice and consent of the
`Senate, or “inferior” officers who may be appointed by
`the Secretary of Commerce in accordance with the
`America Invents Act (“AIA”), a law passed by
`Congress. Leahy-Smith America Invents Act, Pub. L.
`No. 112-29, 125 Stat. 284 (2011) (“AIA”).
`
`Significantly, while each of the Supreme Court
`cases on which the Federal Circuit panel relied
`supported the proposition that APJs are “officers” of
`the United States, every single one of those cases, in
`what could be characterized as analogous statutory
`frameworks, has concluded that the officers in
`question were “inferior officers” and not merely
`employees under the Appointments Clause. See Lucia
`v. SEC, 138 S. Ct. 2044 (2018) (SEC Administrative
`Law Judges are inferior officers); Free Enter. Fund v.
`Pub. Co. Accounting Oversight Bd., 561 U.S. 477
`
`
`
`
`
`
`
`
`
` 8
`
`(2010) (Public Company Accounting Oversight Board
`members are inferior officers); Edmond, 520 U.S. 651
`(judges of the Coast Guard Court of Criminal Appeal
`are inferior officers); Freytag v. Commissioner, 501
`U.S. 868 (1991) (Special Trial Judges for the Tax
`Court are inferior officers); Morrison v. Olson, 487
`U.S. 654 (1988) (independent counsel created by
`provisions of the Ethics of Government Act of 1978 are
`inferior officers); Myers v. United States, 272 U.S. 51
`(1926) (post-master first class is an inferior officer); In
`re Hennen, 38 U.S. 230 (1839) (clerks of district courts
`are inferior officers).
`
`Arthrex I’s analysis failed to pay heed to
`Edmond’s warning that “[t]he exercise of ‘significant
`authority pursuant to the laws of the United States’
`marks, not the line between principal and inferior
`officer for Appointments Clause purposes, but rather,
`as we said in Buckley, the line between officer and
`non-officer.” Edmond, 520 U.S. at 662 (citing Buckley
`v. Valeo, 424 U.S. 1, 126 (1976)).
`
`Purporting to rely upon this Court’s guidance in
`Edmond, the panel first correctly stated that “[t]here
`is no ‘exclusive criterion for distinguishing between
`principal and inferior officers for Appointment Clause
`purposes.’” Pet. App. at 9a (quoting Edmond, 520 U.S.
`at 661). Nonetheless, the panel then plucked factors
`from Edmond to create a three factor test: “(1) whether
`an appointed official has the power to review and
`reverse the officers’ decisions; (2) the level of
`supervision and oversight an appointed official has
`over the officers; and (3) the appointed official’s power
`to remove the officers.” Pet. App. at 9a. (citing
`Edmond, 520 U.S. at 664–65). The panel decided that
`
`
`
`
`
`
`
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`
` 9
`
`two of these factors weighed in favor of APJs being
`found principal officers, while only one factor weighed
`in favor of APJs being found inferior officers. Pet. App.
`at 22a. In a quantitative fashion, the panel ruled that
`APJs were principal officers. Id.
`
`At its heart, the panel’s analysis misses the
`point of Edmond. This Court did not simply generate
`a list of factors that could be tallied and weighed like
`a score card in all future cases, as Arthrex I did below.
`Rather, Supreme Court jurisprudence has made it
`clear that the touchstone of “[w]hether one is an
`‘inferior’ officer depends on whether he has a
`superior.” Edmond, 520 U.S. at 662 (1997). Although
`this Court has “not set forth an exclusive criterion for
`distinguishing between principal and
`inferior
`officers,” the Court has examined factors “such as the
`nature, scope, and duration of an officer’s duties.”
`Seila Law LLC v. Consumer Fin. Prot. Bureau, No. 19-
`7, slip op. at 15 n.3 (U.S. June 29, 2020) (this Court
`focuses “on whether the officer’s work is ‘directed or
`supervised’ by a principal officer”).
`
`As both the Government, here, and Smith &
`Nephew, Inc., in its related petition, No. 19-1452,
`point out, the Federal Circuit panel’s narrow analysis
`of the Edmond factors and mechanical application of a
`balancing test based on those nonexclusive factors
`“misses the central point of Edmond: that an official’s
`status as a principal or inferior officer turns on
`whether, when all of the existing control mechanisms
`are considered together, the officer’s ‘work is directed
`and supervised’ by superiors to a sufficient degree.”
`Pet. for Cert. at 23, United States v. Arthrex, Inc., No.
`19-1434 (U.S. filed June 25, 2020) (quoting Edmond,
`
`
`
`
`
`
`
`10
`
`520 U.S. at 663) (emphasis added); accord Pet. For
`Cert. at 21–24, Smith & Nephew, Inc. v. Arthrex, Inc.,
`No. 19-1452 (U.S. filed June 29, 2020).
`
`In particular, although the Federal Circuit
`panel properly noted that the Director of the United
`States Patent and Trademark Office
`(“PTO”)
`“exercises a broad policy-direction and supervisory
`authority over the APJs” (Pet. App. at 14a), the panel’s
`analysis failed to give due weight to the directorial
`and supervisory powers the Secretary and Director
`have over the PTAB APJs.
`
`The Secretary and the Director—both of whom
`are principal officers and, as such, are appointed by
`the President and confirmed by the Senate (see 15
`U.S.C. § 1501; 35 U.S.C. § 3(a))—have substantial
`supervisory authority of PTAB APJs and their work.
`(35 U.S.C. §§ 1(a), 3(b)(6), 6(a)). Cf. Oil States Energy
`v. Greene’s Energy Grp., 138 S. Ct. 1365, 1380–81
`(2018) (Gorsuch, J., dissenting) (“The Director of the
`Patent Office is a political appointee who serves at the
`pleasure of the President. 35 U.S.C. § 3(a)(1), (a)(4).
`He supervises and pays the Board members
`responsible for deciding patent disputes. §§ 1(a),
`3(b)(6), 6(a).”).
`
`To begin with, the PTO, which includes the
`PTAB, in general, is “subject to the policy direction of
`the Secretary of Commerce.” 35 U.S.C. § 2(a). In turn,
`the Director is “responsible for providing policy
`direction and management supervision for the Office”
`(35 U.S.C. § 3(a)(2)(A)), which, again, includes the
`PTAB.
`
`
`
`
`
`
`
`
`11
`
`In relation to IPR proceedings, the Director
`“shall prescribe regulations” governing substantive
`and procedural conduct, which the PTAB APJs must
`abide by. 35 U.S.C. § 316(a). Indeed, the Director not
`only exercised the power to prescribe regulations
`when the PTAB was first established under the AIA,
`but has also since continued to exercise this power in
`changing those regulations by, for example:
`
`• Instituting a pilot program concerning motions
`to amend in PTAB proceedings and related trial
`procedure. 84 Fed. Reg. 9497 (Mar. 15, 2019);
`the
`broadest
`reasonable
`• Replacing
`interpretation claim construction standard
`with the standard used by Article III federal
`courts—the standard applied in Phillips v.
`AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005). 83
`Fed. Reg. 51340 (Oct. 11, 2018);
`trial practice guide providing
`• Updating
`guidance on the timelines, procedures, and trial
`practice for post-issuance patent challenges,
`originally issued as 77 Fed. Reg. 48612 (Aug.
`14, 2012); 77 Fed. Reg. 48756 (Aug. 14, 2012).
`See Consolidated Trial Practice Guide (Nov.
`2019)
`https://www.uspto.gov/sites/default/files/docum
`ents/tpgnov.pdf?MURL= (last visited July 24,
`2020).
`
`In addition, the Director (not the PTAB APJs,
`to whom he delegates his authority) has the
`unfettered authority to determine whether to institute
`an IPR proceeding. 35 U.S.C. § 314; see Thryv, Inc. v.
`Click-to-Call Techs., LP, 140 S. Ct. 1367 (2020). The
`Director’s authority extends beyond the institution
`
`
`
`
`
`
`
`12
`
`decision and can even be exercised to terminate a
`proceeding before a final written decision, or on
`remand after a final written decision is reversed. See
`BioDelivery Scis. Int’l, Inc. v. Aquestive Therapeutics
`Inc., 935 F.3d 1362, 1366 (Fed. Cir. 2019) (petition for
`writ of certiorari filed June 16, 2020).
`
`“The Director is allowed to select which of these
`members, and how many of them, will hear any
`particular patent challenge. See § 6(c).” Oil States, 138
`S. Ct. at 1381 (Gorsuch, J., dissenting).
`
`Further, while PTAB APJs may participate in
`panels of three (which the Director controls and
`designates, see 35 U.S.C. § 6(c)) and issue orders in a
`particular proceeding that govern the parties to that
`proceeding, they have no ability to set policy for the
`PTO, or even designate a decision as precedential or
`informative “without the approval of the Director.”
`Patent Trial and Appeal Board Standard Operating
`Procedure 2 (Revision 10) (SOP 2) at 1, 10–11,
`https://www.uspto.gov/sites/default/files/documents/S
`OP2%20R10%20FINAL.pdf (last visited July 24,
`2020). Therefore, without the approval of the Director,
`an APJ may not “render a final decision on behalf of
`the United States unless permitted to do so.” Edmond,
`520 U.S. at 665.
`
`The Director also has the authority to issue
`binding guidance on the Board, and has in fact done
`so, for example, in issuing subject matter eligibility
`guidance. Oil States, 138 S. Ct. at 1381 (Gorsuch, J.,
`dissenting) (“Nor has the Director proven bashful
`about asserting these statutory powers to secure the
`‘policy judgments’ he seeks.”); see also, e.g., 2019
`
`
`
`
`
`
`
`13
`
`Revised Patent Subject Matter Eligibility Guidance,
`84 Fed. Reg. 50, 51 (Jan. 7, 2019) (stating that all PTO
`personnel, including its more than 8,500 patent
`examiners and administrative patent judges, “are, as
`a matter of internal agency management, expected to
`follow the guidance”).
`
`In addition to the authority to define agency
`policy and guidance which binds PTAB APJs, the
`Secretary and the Director are authorized to select,
`appoint and remove the PTAB APJs. The Patent Act
`provides that PTAB APJs are “appointed by the
`Secretary, in consultation with the Director” (35
`U.S.C. § 6(a)), in a manner consistent with other
`“inferior officers.”2 The Secretary also has the
`authority to remove PTAB APJs from federal service
`“for such cause as will promote the efficiency of the
`service.” 5 U.S.C. § 7513(a); 35 U.S.C. § 3(c) (making
`USPTO “officers and employees…subject to the
`provisions of title 5, relating to Federal employees”);
`see also Free Enter. Fund, 561 U.S. at 509 (“Under the
`traditional default rule, removal is incident to the
`power of appointment.”). While this removal is
`generally considered “for cause,” as noted by the panel
`in Arthrex I, the failure or refusal to follow binding
`agency policy or guidance, is no doubt one example of
`such “cause.”
`
`Indeed, if the PTAB APJs on a particular panel
`“reach a result he does not like, the Director can add
`
`
`2 Section 6 was modified in 2011 as part of the AIA when the
`Board of Patent Appeals and Interferences was reconstituted
`into the PTAB. Thus, as discussed below in Section IV, the
`constitutional “fix” adopted in response to a 2007 article, was
`again ratified by the amendments made.
`
`
`
`
`
`
`
`14
`
`more members to the panel—including himself—and
`order the case reheard.” Oil States, 138 S. Ct. at 1381
`(Gorsuch, J., dissenting) (citing 35 U.S.C. § 6(a), (c); In
`re Alappat, 33 F.3d 1526, 1535 (Fed. Cir. 1994) (en
`banc); Nidec Motor Corp. v. Zhongshan Broad Ocean
`Motor Co. Ltd., 868 F.3d 1013, 1020 (Fed. Cir. 2017)
`(Dyk, J., concurring), cert. denied, 138 S. Ct. 1695
`(Apr. 30, 2018)).
`
`Given the Director’s power to define and enforce
`such binding agency policy and guidance, and ability
`to out-vote any particular APJ, the Director’s power
`over a PTAB APJ is sufficiently substantial to meet
`this Court’s test.
`
`In short, Askeladden respectfully submits that
`the Federal Circuit panel below erred in focusing too
`narrowly on the three factors it plucked from Edmond,
`in addition to improperly evaluating their cumulative
`effect in determining whether PTAB APJs work is
`sufficiently “directed and supervised” by superior
`officers.
`
`This Is an Important Issue That This Court
`II.
`Should Address
`
`Justice Holmes warned that it “is the gravest
`and most delicate duty that this Court is called on to
`perform”
`to
`declare
`an Act
`of Congress
`unconstitutional. Blodgett v. Holden, 275 U.S. 142,
`147–48 (1927) (Holmes, J., concurring). Here, where a
`lower court has improvidently done so, it is incumbent
`on this Court to perform its supervisory duty and
`either confirm that the lower court was correct, or
`rectify the error.
`
`
`
`
`
`
`
`15
`
`This Court in recent times has taken a
`particularly
`vigilant
`role
`in
`policing
`the
`constitutionality of our nation’s intellectual property
`laws. See, e.g., Oil States, 138 S. Ct. at 1379 (affirming
`Federal Circuit’s conclusion that “inter partes review
`does not violate Article III or
`the Seventh
`Amendment”); Iancu v. Brunetti, 139 S. Ct. 2294, 2302
`(2019) (affirming Federal Circuit’s conclusion that the
`“immoral or scandalous” clause of the Lanham Act
`governing trademark registrations “violates the First
`Amendment”); Matal v. Tam, 137 S. Ct. 1744, 1765
`(2017) (affirming Federal Circuit’s conclusion that
`“the disparagement clause [of the Lanham Act
`governing trademark registrations] violates the Free
`Speech Clause of the First Amendment”). Such
`vigilance is called for here.
`
`As Arthrex I properly observed, “[t]he issue
`presented today has a wide-ranging effect on property
`rights and the nation’s economy. Timely resolution is
`critical to providing certainty to rights holders and
`competitors alike who rely on the inter partes review
`scheme to resolve concerns over patent rights.” Pet.
`App. at 5a. IPRs were intended by Congress to provide
`a “quick and cost effective” alternative to patent
`litigation. H.R. Rep. No. 112-98, at 48 (2011); see also
`S. Rep. No. 110-259, at 20 (2008). IPRs have now
`become an integral part of the U.S. patent system, and
`this Court has addressed the procedure four time
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