Fed. Circ. Told PTAB's Constitutional Problem Dooms All IPRs
By Britain Eakin
Law360 (November 4, 2019, 9:43 PM EST) -- Polaris argued Monday that the Federal Circuit didn't go far enough when it declared the appointment of Patent Trial and Appeal Board judges unconstitutional last week and said that the flaw the court identified means that the entire inter partes review system must be struck down.
That's because the court lacks the authority to order a remedy that will actually make the PTAB's structure constitutional by giving the patent office director the authority to review the board's decisions, Polaris Innovations Ltd. attorney Matthew D. Powers of Tensegrity Law Group LLP said during oral arguments in an appeal of a PTAB decision that invalidated claims of a Polaris computer memory patent challenged by Kingston Technology Company Inc.
"The only remedy is to declare it unconstitutional and let Congress fix it," Powers said of the IPR system.
The court's Oct. 31 decision in Arthrex Inc. v. Smith & Nephew Inc. held that PTAB judges do not have the type of supervision and control from the director of the U.S. Patent and Trademark Office required under the appointments clause of the U.S. Constitution. It therefore struck down a part of the Patent Act that made it difficult for PTAB judges to be removed by their superiors, saying the risk of being fired will constrain their decisions and solve the problem.
However, Powers said that remedy falls short because it doesn't provide a mechanism for meaningful review of PTAB decisions before they become final agency actions reviewable by an Article III court.
Powers said firing judges isn't enough for two reasons. First, if they're fired for making a bad decision, that decision will still stand. Second, if they're worried about being fired for upsetting the USPTO director, "that seems like a fairly blunt instrument and not a very appropriate way of doing it."
Congress would not have wanted PTAB judges to constantly worry about their livelihoods, Powers said.
Like Arthrex, Polaris also challenged the constitutionality of how PTAB judges are appointed in its appeal. But Powers argued that the Arthrex panel might have exceeded its authority by severing the provision of the Patent Act that gives PTAB judges the Title 5 protections from removal.
"I think there's a serious question whether the court has the judicial power to rewrite the statute to the extent that it did," he said.
U.S. Circuit Judge Todd M. Hughes, however, said that wasn't a great argument for Polaris.
"When various courts have faced various appointment clause problems with inferior officers because their removal provisions were too restrictive, this is exactly what a bunch of other courts have done," Judge Hughes said. "This is not us staking out new territory, is it?"
Powers said the Arthrex decision was inconsistent with U.S. Supreme Court guidance that says terminability at will isn't enough and that review of the board's decisions by an executive branch official is required to pass constitutional muster.
Powers told Law360 in an email after the hearing that "even if the court had the power to sever and invalidate PTAB judges' termination provisions, it's still not enough because there still needs to be an effective mechanism to review PTAB decisions."
Since the Federal Circuit cannot rewrite the law to establish such review, the IPR system must be found unconstitutional until Congress can pass a new law to do that, he said.
The appointments clause of the U.S. Constitution specifies that "principal" officers of the government must be appointed by the president and confirmed by the Senate, while "inferior" officers can be appointed by department heads and supervised by a presidentially-appointed principal officer.
The U.S. Patent and Trademark Office has treated PTAB judges as inferior officers who were appointed by the secretary of commerce, but the Arthrex panel ruled that PTAB judges are actually principal officers since they don't have sufficient oversight and were not removable by the USPTO director.
The Arthrex decision noted that there are no procedures for the USPTO director to review or reverse PTAB decisions, and that the director's ability to convene a precedential opinion panel to rehear a case or designate the board's decisions precedential is not enough.
In the current case, Kingston Technology Company wants its panel to wait to issue a decision until the court's ruling in the Arthrex case becomes final so that it won't have to relitigate the IPR before a new panel. Kingston said in a Nov. 1 letter to the court that the PTAB decision at issue would remain legally valid if a rehearing ultimately holds the structure of the PTAB to be constitutional.
Kingston attorney Michael J. Ballanco of Fish & Richardson PC urged the panel to hold the case in abeyance and disputed attorney Powers' contention that a meaningful review mechanism is necessary to cure the constitutional defect in Arthrex.
Judge Hughes proposed supplemental briefing on the Arthrex decision before the panel issues a ruling, but said he hadn't discussed that yet with his other colleagues on the panel and would need their approval to go that route.
Judge Hughes suggested that it might not be worth the court's time to decide the Polaris case before the Arthrex decision is final, since that could result in requests for en banc rehearing being filed in both cases.
"So, why make everybody waste time filing multiple petitions," Judge Hughes asked.
Attorney Powers told the panel in response that the Polaris case would be a better vehicle for rehearing before the full court because unlike the Arthrex case, Polaris wants to challenge the effectiveness of the constitutional cure the Arthrex panel chose.
Government attorney Melissa N. Patterson with the Department of Justice, meanwhile, told the panel that the agency is still considering whether to petition the full court for rehearing in the Arthrex case.
"This was a very important decision — striking down an act of Congress is always a very serious matter, even with a partial invalidation — that we will be looking at very seriously while the solicitor general decides whether or not to seek rehearing en banc," she said.
Patterson told the panel she was concerned about the Federal Circuit issuing "hasty remands" in light of Arthrex, saying that one has already happened since the Arthrex decision came down. In that case, Uniloc had raised an appointments clause challenge in its appeal, prompting that panel to cancel oral arguments and remand the case to the PTAB in light of the Arthrex ruling.
Patterson, however, said the government hadn't been allowed to intervene in that case to fight a remand.
"That, we find a very troubling situation," she said.
Judge Hughes said later in the hearing that "the government, I think, appropriately objects [it was] remanded without their knowledge or ability to participate."
Counsel for Kingston and the Department of Justice declined to comment further.
The patent-in-suit is U.S. Patent No. 6,438,057.
U.S. Circuit Judges Jimmie V. Reyna, Todd M. Hughes and Evan J. Wallach sat on the panel.
Polaris Innovations Limited is represented by Matthew D. Powers of Tensegrity Law Group LLP.
Kingston Technology Company Inc. is represented by Michael J. Ballanco of Fish & Richardson PC.
The United States is represented by Melissa N. Patterson with the Department of Justice.
The case is Polaris Innovations Limited v. Kingston Technology Company Inc., case number 18-1768, at the U.S. Court of Appeals for the Federal Circuit.
--Additional reporting by Ryan Davis. Editing by Michael Watanabe.
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