Nos. 19-1434, 19-1452, 19-1458
`
`IN THE
`Supreme Court of the United States
`
`UNITED STATES OF AMERICA, Petitioner,
`v.
`ARTHREX, INC., et al., Respondents.
`
`SMITH & NEPHEW, INC., et al., Petitioners,
`v.
`ARTHREX, INC., et al., Respondents.
`
`ARTHREX, INC., Petitioner,
`v.
`SMITH & NEPHEW, INC., et al., Respondents.
`
`ON WRITS OF CERTIORARI TO THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT
`
`BRIEF FOR ASKELADDEN L.L.C.
`AS AMICUS CURIAE IN SUPPORT OF
`PETITIONERS IN NOS. 19-1434 & 19-1452
`
`
`GREGORY H. LANTIER
` Counsel of Record
`DAVID M. LEHN
`ANDRES C. SALINAS
`WILMER CUTLER PICKERING
` HALE AND DORR LLP
`1875 Pennsylvania Ave., NW
`Washington, DC 20006
`(202) 663-6000
`gregory.lantier@wilmerhale.com
`
`
`
`
`
`
`
`
`IN THE
`Supreme Court of the United States
`
`UNITED STATES OF AMERICA, Petitioner,
`v.
`ARTHREX, INC., et al., Respondents.
`
`SMITH & NEPHEW, INC., et al., Petitioners,
`v.
`ARTHREX, INC., et al., Respondents.
`
`ARTHREX, INC., Petitioner,
`v.
`SMITH & NEPHEW, INC., et al., Respondents.
`
`ON WRITS OF CERTIORARI TO THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT
`
`BRIEF FOR ASKELADDEN L.L.C.
`AS AMICUS CURIAE IN SUPPORT OF
`PETITIONERS IN NOS. 19-1434 & 19-1452
`
`
`GREGORY H. LANTIER
` Counsel of Record
`DAVID M. LEHN
`ANDRES C. SALINAS
`WILMER CUTLER PICKERING
` HALE AND DORR LLP
`1875 Pennsylvania Ave., NW
`Washington, DC 20006
`(202) 663-6000
`gregory.lantier@wilmerhale.com
`
`
`
`
`
`
`
`
`
`
`TABLE OF CONTENTS
`
`Page
`TABLE OF AUTHORITIES ........................................... ii
`INTEREST OF AMICUS CURIAE............................... 1
`SUMMARY OF ARGUMENT ........................................... 2
`ARGUMENT ........................................................................ 4
`I. CONGRESS PROPERLY AUTHORIZED APJS
`TO ADJUDICATE IPRS IN ORDER TO
`ADDRESS PERNICIOUS PROBLEMS ARISING
`FROM DUBIOUS PATENTS ............................................ 4
`A. Congress Established The PTAB And
`IPR To Fix A Broken Patent System ................ 4
`B. IPR Proceedings Have Repeatedly
`Survived Constitutional Challenges In
`This Court And Lower Courts ............................ 8
`II. APJS ARE INFERIOR OFFICERS WHO MAY
`BE CONSTITUTIONALLY APPOINTED BY
`THE SECRETARY OF COMMERCE ............................. 11
`A. The Secretary And PTO Director Are
`Empowered To Supervise APJs To
`Ensure Adherence To Their Policies
`And
`Consistent
`Review
`Of
`Patentability ........................................................ 11
`B. This Court’s Precedent Establishes
`That APJs Are Inferior Officers ....................... 16
`C. The Federal Circuit’s Decision Has
`Disrupted The Effective Regime That
`Congress Established ......................................... 19
`CONCLUSION ................................................................. 20
`
`
`
`
`
`ii
`
`TABLE OF AUTHORITIES
`
`CASES
`
`Page(s)
`
`Avalos v. Department of Housing & Urban
`Development, 963 F.3d 1360 (Fed. Cir.
`2020) ............................................................................. 13
`Bilski v. Kappos, 561 U.S. 593 (2010) ............................... 5
`Bowsher v. Synar, 478 U.S. 714 (1986) ........................... 17
`Buckley v. Valeo, 424 U.S. 1 (1976) ................................ 17
`Celgene Corp. v. Peter, 931 F.3d 1342 (Fed. Cir.
`2019) ............................................................................. 10
`Collabo Innovations, Inc. v. Sony Corp., 778 F.
`App’x 954 (Fed. Cir. 2019)......................................... 10
`Cuozzo Speed Technologies, LLC v. Lee, 136 S.
`Ct. 2131 (2016) ............................................................... 9
`Denver & Rio Grande Western Railroad Co. v.
`of Railroad Trainmen,
`Brotherhood
`387 U.S. 556 (1967) ..................................................... 10
`Edmond v. United States, 520 U.S. 651
`(1997) ............................................................. 3, 11-13, 17
`Free Enterprise Fund v. Public Company
`Accounting Oversight Board, 561 U.S. 477
`(2010) ............................................................................ 18
`Freytag v. Commissioner, 501 U.S. 868 (1991) ............. 18
`Graham v. John Deere Co. of Kansas City,
`383 U.S. 1 (1966) ........................................................... 9
`Granfinanciera, S.A. v. Nordberg, 492 U.S. 33
`(1989) .............................................................................. 9
`
`
`
`
`
`iii
`
`TABLE OF AUTHORITIES—Continued
`
`Page(s)
`
`In re Boloro Global Ltd., 963 F.3d 1380 (Fed.
`Cir. 2020) ...................................................................... 19
`In re Hennen, 38 U.S. 230 (1839) ..................................... 18
`Lucia v. SEC, 138 S. Ct. 2044 (2018) ......................... 17-18
`Microsoft Corp. v.
`i4i Ltd. Partnership,
`564 U.S. 91 (2011) ......................................................... 7
`Morrison v. Olson, 487 U.S. 654 (1988) .................... 13, 18
`Motion Picture Patents Co. v. Universal Film
`Manufacturing Co., 243 U.S. 502 (1917) ................... 5
`Myers v. United States, 272 U.S. 52 (1926) ............... 17-18
`Oil States Energy Services, LLC v. Greene’s
`Energy Group, LLC, 138 S. Ct. 1365
`(2018) ........................................................... 6-7, 9, 13-15
`Pope Manufaturing Co. v. Gormully, 144 U.S.
`224 (1892) ....................................................................... 5
`Return Mail, Inc. v. U.S. Postal Service, 139 S.
`Ct. 1853 (2019) ............................................................ 6-7
`State Street Bank & Trust Co. v. Signature
`Financial Group, Inc., 149 F.3d 1368 (Fed.
`Cir. 1998) ........................................................................ 5
`Thryv, Inc v. Click-To-Call Technologies, LP,
`140 S. Ct. 1367 (2020) ................................................... 6
`Virnetx Inc. v. Cisco Systems, Inc., 958 F.3d
`1333 (Fed. Cir. 2020) .................................................. 19
`
`DOCKETED CASES
`Celgene Corp. v. Peter, No. 19-1074 (U.S.) .................... 10
`
`
`
`
`
`iv
`
`TABLE OF AUTHORITIES—Continued
`
`Page(s)
`Collabo Innovations, Inc. v. Sony Corp.,
`No. 19-601 (U.S.) ......................................................... 10
`Enzo Life Sciences v. Becton, Dickinson & Co.,
`No. 19-1097 (U.S.) ....................................................... 10
`
`CONSTITUTIONAL, STATUTORY, AND
`REGULATORY PROVISIONS
`U.S. Const. art. II, § 2, cl. 2 .............................................. 11
`5 U.S.C. § 7513 ............................................................... 4, 13
`35 U.S.C.
`§ 1 .................................................................................. 12
`§ 2 .................................................................................. 14
`§ 3 ............................................................................. 13-14
`§ 6 ..................................................................... 7, 9, 13-15
`§ 143 ................................................................................ 7
`§ 282 ................................................................................ 7
`§ 311 ................................................................................ 6
`§ 314 .......................................................................... 6, 15
`§ 316 .......................................................................... 7, 14
`§ 318 ................................................................................ 7
`§ 319 ................................................................................ 7
`§ 326 .............................................................................. 14
`Leahy-Smith America Invents Act, Pub. L. No.
`112-29, 125 Stat. 284 (2011) ..................................... 2, 9
`37 C.F.R. pt. 42, subpts. A, B .......................................... 14
`
`LEGISLATIVE MATERIALS
`H.R. Rep. No. 112-98, pt. 1 (2011) .......................... 4-6, 8, 16
`157 Cong. Rec. S130 (daily ed. Jan 25, 2011) ............... 3, 8
`
`
`
`
`
`v
`
`TABLE OF AUTHORITIES—Continued
`
`Page(s)
`157 Cong. Rec. S1053 (daily ed. Mar. 1, 2011) ................. 6
`157 Cong Rec. S1360 (daily ed. Mar. 8, 2011) .................. 5
`157 Cong. Rec. H4420 (daily ed. June 22, 2011) .............. 4
`157 Cong. Rec. S7413 (daily ed. Nov. 14, 2011) ............... 5
`
`ADMINISTRATIVE MATERIALS
`General Order in Cases Remanded Under Ar-
`threx, Inc. v. Smith & Nephew, Inc., 941
`F.3d 1320 (Fed. Cir. 2019), 2020 WL
`2119932 (P.T.A.B. May 1, 2020) ................................ 19
`PTO Standard Operating Procedure 1 (SOP-1)
`(rev. 15, Sept. 20, 2018), https://www.uspto.
`gov/sites/default/files/documents/SOP%201
`%20R15%20FINAL.pdf ...................................... 13, 15
`PTO Standard Operating Procedure 2 (SOP-2)
`(rev. 10, Sept. 20, 2018), https://www.uspto.
`gov/sites/default/files/documents/SOP2%20
`R10%20FINAL.pdf .................................................... 14
`USPTO, Patent Trial and Appeal Board, Trial
`Statistics (Sept. 30, 2020), https://www.
`uspto.gov/sites/default/files/documents/trial
`_statistics_20200930.pdf .................................... 6, 8, 19
`
`SECONDARY AUTHORITIES
`Bessen, James, The Evidence Is In: Patent
`Trolls Do Hurt Innovation, Harv. Bus.
`Rev. (2014) ..................................................................... 4
`
`
`
`
`
`vi
`
`TABLE OF AUTHORITIES—Continued
`
`Page(s)
`
`Lerner, Josh, et al., Harvard Business School,
`Working Paper 16-068, Financial Patent
`Quality: Patents After State Street (2015),
`https://www.hbs.edu/faculty/publication%2
`0files/16-068_702dabb8-70c5-4917-a257-75d
`c8b0c4f6b.pdf ................................................................. 5
`
`
`
`
`
`
`
`
`
`INTEREST OF AMICUS CURIAE1
`Askeladden L.L.C. is a wholly owned subsidiary of
`The Clearing House Payments Company L.L.C. The
`Clearing House is a banking association and payments
`company that is owned by the world’s largest commer-
`cial banks and dates back to 1853. The Clearing House
`owns and operates core payments system infrastruc-
`ture in the United States. It is the only private-sector
`automated clearing house (ACH) and wire operator in
`the United States, clearing and settling nearly $2 tril-
`lion in U.S. dollar payments each day—half of all com-
`mercial ACH and wire volume. The Clearing House
`continues to leverage its unique capabilities to support
`bank-led innovation, including launching the RTP®
`network, a real-time payment platform that modernizes
`core payments capabilities for all U.S. financial institu-
`tions. As the country’s oldest banking trade associa-
`tion, The Clearing House also provides informed advo-
`cacy and thought leadership on critical payments-
`related issues facing financial institutions today.
`Independently of the business and activities of The
`Clearing House, Askeladden founded the Patent Quality
`Initiative (PQI) as an education, information, and advo-
`cacy effort to improve the understanding, use, and relia-
`bility of patents in financial services and elsewhere.
`Through the PQI, Askeladden strives to improve the
`patent system by challenging the validity of low-quality
`patents and by promoting improved patent holder be-
`
`
`1 No counsel for a party authored this brief in whole or in
`part, and no entity or person, other than amicus curiae, its mem-
`bers, and its counsel, made a monetary contribution intended to
`fund the preparation or submission of this brief. Letters from the
`parties consenting to the filing of this brief are on file with the
`Clerk.
`
`
`
`
`
`2
`
`havior, while also supporting effective intellectual prop-
`erty practices and improved innovation rights. To that
`end, Askeladden regularly files amicus briefs in cases
`presenting important issues of patent law.
`This is such a case. The Federal Circuit’s errone-
`ous decision that administrative patent judges (APJs)
`are principal officers requiring appointment by the
`President and confirmation by the Senate will wreak
`havoc on the patent system. Askeladden therefore
`submits this brief to urge this Court to reverse.
`
`SUMMARY OF ARGUMENT
`By 2011, the patent system had spiraled out of con-
`trol, in large part due to the proliferation of low-quality
`patents issuing from the Patent and Trademark Office
`(PTO), including many such patents asserted against
`financial services companies. That was a problem of
`significant public concern because improperly issued
`patents discourage innovation, distort interstate com-
`merce, and burden the courts. Congress responded by
`enacting the Leahy-Smith America Invents Act (AIA),
`which enhanced the mechanisms by which the validity
`of issued patents can be challenged in the PTO. See
`Pub. L. No. 112-29, § 18, 125 Stat. 284, 329-331 (2011).
`This case concerns the administrative patent judges
`who—sitting on panels of three or more members of the
`Patent Trial and Appeal Board (PTAB)—conduct inter
`partes review (IPR) and the other proceedings for
`evaluating patent validity that Congress established in
`the AIA.
`This Court has already rejected one constitutional
`challenge to IPR, and the Federal Circuit has rejected
`several others. Here, though, the Federal Circuit held
`that the appointment of APJs by the Secretary of
`
`
`
`
`
`3
`
`Commerce violates the Appointments Clause of the
`Constitution because APJs are principal officers of the
`United States who must be appointed by the President
`and confirmed by the Senate. That decision was erro-
`neous because it overlooked how Congress vested in
`the Secretary and the PTO Director numerous mecha-
`nisms to assert extensive control over APJs’ work. In-
`deed, without such controls, Congress could not possi-
`bly have expected IPR to achieve its objective of “sep-
`arat[ing] the inventive wheat from the chaff” on a
`large-scale, consistent basis, which a well-functioning
`patent system requires. 157 Cong. Rec. S130, S131
`(daily ed. Jan. 25, 2011) (statement of Sen. Leahy). For
`example, Congress granted the Secretary and the Di-
`rector the power to establish PTO policies, and made
`the Director responsible for the “management supervi-
`sion” of the PTO. Further, Congress granted the Sec-
`retary wide power to remove APJs from office and
`granted the Director unfettered power to determine
`APJs’ assignments—both “powerful tool[s] for control,”
`Edmond v. United States, 520 U.S. 651, 664 (1997). The
`Director thus controls whether an APJ decides any-
`thing at all, and he can use his assignment power to
`choose APJs who he expects will reach a decision—in
`the first instance or on rehearing—that accords with
`his views in a given case.
`Even if neither the Secretary nor the Director di-
`rectly reviews APJs’ decisions, this Court has never
`held that such review is the sine qua non of inferior-
`officer status. Rather, what matters is whether the of-
`ficer’s “work is directed and supervised at some level.”
`Edmond, 520 U.S. at 663. As this brief explains, the
`Secretary and the Director—separately and together—
`do direct and supervise APJs’ work in extensive ways.
`
`
`
`
`
`4
`
`Therefore, Congress’s choice to vest the power to ap-
`point APJs in the Secretary was constitutionally sound.2
`
`ARGUMENT
`I. CONGRESS PROPERLY AUTHORIZED APJS TO ADJUDI-
`CATE IPRS IN ORDER TO ADDRESS PERNICIOUS PROB-
`LEMS ARISING FROM DUBIOUS PATENTS
`A. Congress Established The PTAB And IPR To
`Fix A Broken Patent System
`In 2011, Congress established IPR proceedings and
`created the PTAB “to correct flaws in the [patent] sys-
`tem that ha[d] become unbearable.” H.R. Rep. No. 112-
`98, pt. 1, at 38-39 (2011). “[Q]uestionable patents,”
`Congress observed, were “too easily obtained” and “too
`difficult to challenge.” Id. at 39. “In several industries”
`patents were “often multitudinous, vague, and highly
`abstract.” Id. at 163-164. And patent-assertion entities
`seized on this state of affairs, bringing scores of merit-
`less lawsuits under largely invalid patents—lawsuits
`that cost defendants more than $29 billion in 2011 alone.
`Bessen, The Evidence Is In: Patent Trolls Do Hurt
`Innovation, Harv. Bus. Rev. (Nov. 2014).
`The problem was particularly acute in the financial
`services and business communities. Patent-assertion
`entities used “some of the most questionable business
`method patents … for years to extort money from legit-
`imate businesses.” 157 Cong. Rec. H4420, H4425-4426
`(daily ed. June 22, 2011) (statement of Rep. Goodlatte).
`These opportunists “ha[d] invented nothing, offer[ed]
`
`2 The Court accordingly need not reach—and this brief does
`not address—the second question presented, regarding whether
`the court of appeals properly cured any Appointments Clause de-
`fect by severing application of the removal standard in 5 U.S.C.
`§ 7513(a) to APJs.
`
`
`
`
`
`5
`
`no product or service and employ[ed] no one.” 157
`Cong Rec. S1360, S1365 (daily ed. Mar. 8, 2011) (letter
`from Independent Community Bankers of America en-
`tered into the record by Sen. Schumer). Yet their abil-
`ity to use patents “of questionable quality” to “extract[]
`large settlements from community banks … threat-
`en[ed] … bankers’ ability to provide banking and bank-
`ing related services to their local communities and to
`local small businesses.” Id.
`This conduct was further enabled by the Federal
`Circuit’s erroneous decision in State Street Bank &
`Trust Co. v. Signature Financial Group, Inc., 149 F.3d
`1368 (Fed. Cir. 1998), which adopted a liberal patent-
`eligibility standard for business-method patents. That
`error was eventually corrected, see Bilski v. Kappos,
`561 U.S. 593, 612 (2010), but for twelve years, State
`Street Bank led the PTO to issue hundreds of “poor
`business-method patents,” H.R. Rep. No. 112-98, pt. 1
`at 54, that Congress recognized were “likely … now in-
`valid,” 157 Cong. Rec. S7413, S7413 (daily ed. Nov. 14,
`2011) (letter from House Judiciary Committee chair-
`man entered into the record by Sen. Kyl); see also Ler-
`ner et al., Harvard Business School, Working Paper 16-
`068, Financial Patent Quality: Patents After State
`Street (2015) (study sponsored by Askeladden) (sur-
`veying financial services patents from 2001 to 2010 and
`finding indicators of lower patent quality relative to
`other patents). As a result, the patent system did “not
`promote the progress of science and the useful arts,”
`but instead created entirely undeserved “private for-
`tunes,” Motion Picture Patents Co. v. Universal Film
`Mfg. Co., 243 U.S. 502, 511 (1917), and “repressed”
`competition through worthless patents,” Pope Mfg. Co.
`v. Gormully, 144 U.S. 224, 234 (1892).
`
`
`
`
`
`6
`
`With the “scourge” of “frivolous business method
`patents” in mind, 157 Cong. Rec. S1053, 1053 (daily ed.
`Mar. 1, 2011) (statement of Sen. Schumer), and “con-
`cerned about” the resulting “diminishment of competi-
`tion,” Congress enacted the AIA to strengthen the
`PTO’s ability “to weed out bad patent claims efficient-
`ly,” Thryv, Inc v. Click-To-Call Techs., LP, 140 S. Ct.
`1367, 1374 (2020); see H.R. Rep. No. 112-98, pt. 1, at 40
`(“The legislation is designed to establish a more effi-
`cient and streamlined patent system that will improve
`patent quality and limit unnecessary and counterpro-
`ductive litigation costs.”). The Act established “three
`new types of post-issuance review proceedings”: inter
`partes review, post-grant review (PGR), and covered
`business method review (CBM). Return Mail, Inc. v.
`U.S. Postal Serv., 139 S. Ct. 1853, 1860 (2019). IPR is,
`by far, the most prominent of these proceedings: Since
`the AIA went into effect in 2012, IPR has accounted for
`93% of the petitions filed with the PTO under the AIA.
`USPTO, Patent Trial and Appeal Board, Trial Statis-
`tics 3 (Sept. 30, 2020) (“PTAB Trial Statistics”).
`“Any person other than the patent owner can file a
`petition for inter partes review.” Oil States Energy
`Servs., LLC v. Greene’s Energy Grp., LLC, 138 S. Ct.
`1365, 1371 (2018) (citing 35 U.S.C. § 311(a) (2012)). The
`PTO Director then decides whether to grant the IPR
`petition and institute the IPR, provided the statutory
`requirements—including that “there is a reasonable
`likelihood that the petitioner would prevail with re-
`spect to at least 1 of the claims challenged in the peti-
`tion”—are met. 35 U.S.C. § 314(a).
`To achieve its objective of “mak[ing] the patent
`system more efficient and improv[ing[ the quality of
`patents,” H.R. Rep. No. 112-98, pt. 1, at 48, Congress
`provided that IPR proceedings would “include[] some
`
`
`
`
`
`7
`
`of the features of adversarial litigation.” Oil States, 138
`S. Ct. at 1378. The parties may thus “seek discovery,
`file affidavits and other written memoranda, and re-
`quest an oral hearing.” Return Mail, 139 S. Ct. at 1860;
`see also 35 U.S.C. § 316. Unlike in infringement litiga-
`tion, however, the presumption of validity does not ap-
`ply, and the petitioner must prove unpatentability only
`by a preponderance of the evidence, id. §§ 282, 316(e),
`rather than by clear and convincing evidence, Microsoft
`Corp. v. i4i Ltd. P’ship, 564 U.S. 91, 95 (2011).
`IPR proceedings take place before the PTAB,
`which comprises the Director, the Deputy Director,
`two Commissioners for Patents and Trademarks, and
`more than 200 “administrative patent judges.” 35
`U.S.C. §§ 6, 316(c). The Board adjudicates each review
`in panels of “at least 3 members … designated by the
`Director.” Id. § 6(c). At the conclusion of proceedings,
`the panel “either confirms the patents claims or cancels
`some or all of the claims.” Return Mail, 139 S. Ct. at
`1860; see also 35 U.S.C. § 318(b). Any party “dissatis-
`fied” with the Board’s decision “may appeal the deci-
`sion” to the Federal Circuit, id. § 319, and the Director
`may intervene in any such appeal, id. § 143.3
`In the eight years since the AIA took effect, the cre-
`ation of IPR and the other post-grant proceedings has
`proven to be an overwhelming success. Of course, not
`every patent claim subject to review is invalidated, but
`invalid claims have been addressed efficiently and effec-
`tively. Of the 12,147 petitions for review of a granted
`patent filed under the AIA between September 2012
`
`3 Besides conducting IPR, the PTAB also “review[s] adverse
`decisions of examiners,” “review[s] appeals of reexaminations,”
`“conduct[s] derivation proceedings,” and “conduct[s] … post-grant
`reviews.” 35 U.S.C. § 6(b).
`
`
`
`
`
`8
`
`and September 2020, the Board instituted proceedings in
`over half (6,228). PTAB Trial Statistics 10. In the “Me-
`chanical & Business Method” category, which accounts
`for 26% of all petitions filed under the AIA, the institu-
`tion rate is even higher: 67%. Id. at 4, 7. Of the total in-
`stituted petitions across all technologies, 3,414 resulted
`in final written decisions, 80% of which invalidated some
`or all of the challenge claims. Id. at 10-11.
`In sum, then, the AIA’s review mechanisms have
`proven effective at “separat[ing] the inventive wheat
`from the chaff,” as Congress intended. 157 Cong. Rec.
`S130, S131 (daily ed. Jan. 25, 2011) (statement of Sen.
`Leahy). By “improv[ing] patent quality and restor[ing]
`confidence in the presumption of validity that comes
`with issued patents,” H.R. Rep. No. 112-98, pt. 1, at 48,
`IPR proceedings serve the indisputable public interest
`in preventing the harms to innovation and commerce
`that invalid patents inflict.
`
`B. IPR Proceedings Have Repeatedly Survived
`Constitutional Challenges In This Court And
`Lower Courts
`In light of IPR’s overwhelming success, it is unsur-
`prising that owners of invalid patents have asserted a
`number of challenges to its constitutionality. To date,
`these challenges have all rightly failed.
`1. In Oil States, this Court correctly held that
`that IPR did not violate Article III or the Seventh
`Amendment. Confronted with the argument that IPR
`proceedings are an improper exercise of judicial power
`by an administrative agency, the Court explained that
`the issuance of a patent is a matter of public right, and
`that Congress has “significant latitude to assign adjudi-
`cation of public rights to entities other than Article III
`
`
`
`
`
`9
`
`courts.” 138 S. Ct. at 1373. The AIA’s IPR provisions,
`the Court further explained, merely provide that pa-
`tents “are granted subject to the qualification that the
`PTO has ‘the authority to reexamine—and perhaps
`cancel—a patent claim’” in a subsequent administrative
`proceeding. Id. at 1374 (quoting Cuozzo Speed Techs.,
`LLC v. Lee, 136 S. Ct. 2131, 2137 (2016)). As the Court
`recognized, “franchises can be qualified in this manner”
`without creating constitutional concerns. Id. at 1375.
`Indeed, the Court stressed that it has long “recognized
`that, ‘[w]ithin the scope established by the Constitu-
`tion, Congress may set out conditions and tests for pa-
`tentability.’” Id. at 1377 (quoting Graham v. John
`Deere Co. of Kansas City, 383 U.S. 1, 6 (1966)). “[I]nter
`partes review,” the court concluded, was simply anoth-
`er “one of those conditions.” Id.
`Having determined that IPR did not violate Article
`III, the Court in Oil States had little trouble holding
`that it also did not infringe on the Seventh Amendment
`“right of trial by jury.” 138 S. Ct. at 1379. The Court
`explained that “when Congress properly assigns a mat-
`ter to adjudication in a non-Article III tribunal, ‘the
`Seventh Amendment poses no independent bar to the
`adjudication of that action by a nonjury factfinder.’” Id.
`(quoting Granfinanciera, S.A. v. Nordberg, 492 U.S. 33,
`53-54 (1989)). “Thus, [the] rejection of Oil States’ Arti-
`cle III challenge also resolve[d] its Seventh Amend-
`ment challenge.” Id.
`2. Following Oil States, challengers brought a
`number of claims against IPR under the Fifth Amend-
`ment. Those challenges—which focused on the applica-
`tion of IPR to patents issued before the AIA was en-
`acted, see Pub. L No. 112-29, § 6(c)(2)(A), 125 Stat.
`304—were all rejected by the Federal Circuit.
`
`
`
`
`
`10
`
`In Celgene Corp. v. Peter, 931 F.3d 1342, 1362 (Fed.
`Cir. 2019), the circuit held that “retroactive application”
`of IPR to “pre-AIA patents is not an unconstitutional
`taking.” In reaching that conclusion, the court explained
`that “[f]or forty years,” in reexamination procedures
`that preceded IPR, the PTO was authorized to “consider
`the validity of issued patents on particular grounds, ap-
`plying a preponderance of the evidence standard.” Id. at
`1362-1363. The court acknowledged that there were
`“differences between IPRs and their predecessors …
`given that Congress passed the AIA with post grant re-
`view procedures that were intentionally more robust.”
`Id. at 1361. But because those differences “‘did not alter
`patent holders’ substantive rights,’” the court concluded
`that they do not “effectuate a taking” under the Fifth
`Amendment. Id. at 1358, 1363.
`Relying on Celgene, the Federal Circuit later re-
`jected a due process challenge to IPRs as well. See
`Collabo Innovations, Inc. v. Sony Corp., 778 F. App’x
`954, 961 (Fed. Cir. 2019). Indeed, as Celgene itself rec-
`ognized, the differences between IPR and its predeces-
`sors were principally “procedural,” and for purposes of
`due process, “‘[n]o one has a vested right in any given
`mode of procedure.’” 931 F.3d at 1361 (alteration in
`original) (quoting Denver & Rio Grande W. R.R. Co. v.
`Brotherhood of R.R. Trainmen, 387 U.S. 556, 563
`(1967)). In other words, “the variations from the ad-
`ministrative validity review mechanisms in place upon
`patent issuance are not so significant as to render IPR
`unconstitutional.” Collabo, 778 F. App’x at 961.
`Multiple cert petitions raising the Fifth Amend-
`ment issues have been filed, but this Court has thus far
`denied all of them. See Collabo Innovations, Inc. v.
`Sony Corp., No. 19-601 (U.S. June 22, 2020); Celgene
`Corp. v. Peter, No. 19-1074 (U.S. June 22, 2020); Enzo
`
`
`
`
`
`11
`
`Life Scis., Inc. v. Becton, Dickinson & Co., No. 19-1097
`(U.S. June 22, 2020).
`
`II. APJS ARE INFERIOR OFFICERS WHO MAY BE CONSTI-
`TUTIONALLY APPOINTED BY THE SECRETARY OF COM-
`MERCE
`This case marks the latest constitutional attack on
`IPR proceedings. But unlike its forerunners, this case
`does not challenge the propriety of IPR itself as a
`means for reconsidering the validity of issued patents.
`Indeed, as noted, there is now little question that is-
`sued patents may be reexamined in IPR’s adjudicative
`process without encroaching on the authority of the ju-
`diciary or infringing the patent owner’s rights. In-
`stead, this case concerns whether the 200-plus APJs
`who conduct IPRs are constitutionally capable of doing
`so without being appointed by the President and con-
`firmed by the Senate. The answer to that question is
`plainly yes. The Federal Circuit erred in holding that
`the Patent Act “as currently constructed makes the
`APJs principal officers” who were appointed in viola-
`tion of the Appointments Clause, U.S. Const. art. II,
`§ 2, cl. 2. U.S. Pet. App. 1a-2a.
`
`A. The Secretary And PTO Director Are Em-
`powered To Supervise APJs To Ensure Ad-
`herence To Their Policies And Consistent
`Review Of Patentability
`Under the Appointments Clause, principal officers
`must be selected by the President with the advice and
`consent of the Senate, while Congress “may vest” the
`appointment of “inferior Officers … in the President
`alone, in the Courts of Law, or in the Heads of Depart-
`ments,” U.S. Const. art. II, § 2, cl. 2. See, e.g., Edmond
`v. United States, 520 U.S. 651, 659 (1997). Although
`
`
`
`
`
`12
`
`this Court has “not set forth an exclusive criterion for
`distinguishing between principal and inferior officers,”
`the Court has made clear that the touchstone of the in-
`quiry is whether the officer at issue “has a superior.”
`Id. at 661-662. After all, “the term ‘inferior officer’ con-
`notes a relationship with some higher ranking officer or
`officers below the President.” Id. at 662. As a general
`matter, then, the focus is on 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.” Id. at 663.
`Here, although the AIA does not provide a mecha-
`nism by which a superior officer may directly review a
`PTAB decision, APJs are nonetheless supervised by
`two officers: the Secretary of Commerce and the PTO
`Director. Indeed, a regime to the contrary would make
`no sense. Congress would have never entrusted 200-
`plus APJs with the sole responsibility of ensuring that
`the AIA accomplished its objectives if they were ac-
`countable to no one but the President. Direct presiden-
`tial supervision would have been unmanageable. Con-
`gress thus provided the Secretary and the Director
`with various supervisory controls that enable them in-
`dividually and jointly to steer APJs’ decisions in essen-
`tial ways. See Edmond, 520 U.S. at 664 (Court of Crim-
`inal Appeals judges held inferior where “[s]upervision
`of the work of … judges is divided between” two execu-
`tive branch entities).
`1. Under the Patent Act, the Secretary has ulti-
`mate control over APJs. He exercises general policy-
`making authority over APJs: The entire PTO—
`including APJs—is “subject to the policy direction of
`the Secretary of Commerce.” 35 U.S.C. § 1(a). And the
`Secretary has the power to remove APJs under the de-
`fault standard applicable to federal civil-service em-
`
`
`
`
`
`13
`
`ployees: “for such cause as will promote the efficiency
`of the service.” 5 U.S.C. § 7513(a); see also 35 U.S.C.
`§ 3(c) (applying § 7513(a) to PTO “officers and employ-
`ees”). That standard is typically satisfied whenever
`there is a “rational basis” for concluding that the em-
`ployee’s discharge “‘will promote the efficiency of the
`service.’” Avalos v. Department of Hous. & Urban
`Dev., 963 F.3d 1360, 1369-1370 (Fed. Cir. 2020). As this
`Court has recognized, the threat of removal is “a pow-
`erful tool for control.” Edmond, 520 U.S. at 664; see
`Morrison v. Olson, 487 U.S. 654, 671 (1988) (that Inde-
`pendent Counsel was “subject to removal by a higher
`Executive Branch official” weighed heavily in favor of
`inferior status). The Secretary can wield his removal
`power to ensure that APJs adhere to his policies.
`2. Although the Director cannot remove APJs
`from office, he also has a toolbox to “supervise” APJs
`and steer their decisions. Oil States, 138 S. Ct. at 1381
`(Gorsuch, J., dissenting). At the highest level, the AIA
`“vest[s]” the “powers and duties of the United States
`Patent and Trademark Office”—which, again, includes
`APJs—in the Director. 35 U.S.C. § 3(a)(1). And the
`AIA makes the Director “responsible for providing”
`both “policy direction” and “management supervision”
`for the PTO, including APJs. Id. § 3(a)(2)(A).
`The Director also controls each APJs’ workload and
`pay. The Director has unfettered discretion to “desig-
`nate[]” who will serve on the PTAB panel in each case.
`35 U.S.C. § 6(a), (c).4 Consequently, the Director de-
`
`4 The Director has delegated this authority to the Board’s
`Chief Judge, but in doing so, made clear that “the Director express-
`ly retains his or her own statutory authority to designate panels …
`at any time, … in his or her sole discretion.” PTAB Standard Op-
`erating
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