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Federal Circuit Denies Stay of Arthrex Remands: PTAB Must Start Working on Rehearings

On March 30, 2020, the Federal Circuit denied the federal government’s unopposed motion to stay a mandate of the court’s final judgment in Arthrex v. Smith & Nephew, meaning the United States Patent Office’s Patent Trial and Appeal Board (“PTAB”) must reopen and rehear up to 81 cases decided by the PTAB before the Arthrex final judgment issued.  The earlier opinion, issued on October 31, 2019, deals with the constitutionality of the appointment of the Administrative Patent Judges (“APJs”) who are responsible for presiding over adjudicative proceedings.  The final judgment resulted in providing constitutional grounds to challenge the decisions of the PTAB’s APJs to those with pending appeals with the Federal Circuit, provided those appeals were pending at the time of the Arthrex judgment and that the constitutional issue had been raised during the appeal’s briefing stage.  With its motion to stay, the government attempted to receive temporary relief during the pendency of petitions for writ of certiorari of the Arthrex opinion, but the denial marks the Federal Circuit’s consistent position[1] that the PTAB must start the rehearing process.

The Arthrex opinion held that APJs were appointed in violation of the Appointments Clause of the U.S. Constitution because, while the Patent Act provided for APJs to be appointed by the Secretary of Commerce, in consultation with the Director of the USPTO (consistent with being an “inferior officer” under the Appointments Clause), APJs were shielded from removal by their superiors (reserved only for “principal officers” under the Appointments Clause).  Among the significant repercussions following the Federal Circuit’s Arthrex decision was the uncertain legal status of PTAB decisions invalidating patent claims, given that the APJs presiding over such decisions were deemed to have been unconstitutionally appointed.  While the Federal Circuit stated in Arthrex that severing the removal provisions from the Patent Act reestablished the PTAB judges as constitutional officers, it remanded that case, requiring the PTAB to grant a new hearing with a new panel of APJs presiding.  The court thus opened the door for other PTAB cases to receive a second hearing with a new panel of APJs, provided that the decision was pending appeal with the Federal Circuit before the October 31, 2019 opinion, and that the requesting party had raised the constitutional issue in its appeal brief.

The government moved to stay the remand proceedings for ninety days or final disposition of any petition for writ of certiorari on the basis of practicality, arguing that the PTAB should be able to defer conducting the Arthrex rehearings while Supreme Court review of the case was pending.  The stay of remand was supported by all of the parties.   However, the Federal Circuit concluded that public interest would favor denying such a stay, pointing to the harm that would result from the continuing existence of patent claims that were deemed unpatentable by the PTAB in the relevant proceedings.  Those claims would continue to have legal force, as well as potentially obligate the payment of fees under license agreements that require payment until a final adjudication of invalidity – an event the Federal Circuit alleged to be common.  In addition, the court commented that the remand proceedings did not seem especially burdensome, given the maximum number of 81 cases to be reheard and the fact that the PTAB “has more than 250 members” who can adjudicate them.

Significantly, the Federal Circuit left considerable discretion as to the rehearings up to the PTAB.  The recent order explicitly states that the timing of the proceedings, at least as an initial matter, is in the PTAB’s hands, and did not opine on the availability of review of the remand proceedings.  It also noted the “limited remand proceedings” required by the October 31, 2019 decision, which specified that a new panel of APJs must be used but left the decision of whether to rehear using the existing record or to allow additional briefing up to the PTAB.

It remains to be seen how the PTAB will carry out the remand proceedings or when the PTAB will commence doing so.  A significant factor in all of the proceedings will be the extent to which the PTAB will allow new evidence or arguments to the record, if at all, and what standard it will use when deciding to do so.  The coronavirus pandemic and its effect on PTAB administration will also certainly play a role in when the rehearings occur.  However, given the fact that adverse parties will frequently want additional evidence and briefing, and the Federal Circuit’s no-comment on the availability of review of rehearing decisions, the burden on the PTAB will likely be greater than the Federal Circuit’s estimation.

[1] The Federal Circuit had, the previous week, denied petitions for rehearing en banc filed by appellees Smith & Nephew, Inc. and Arthrocare Corp.; appellants Arthrex, Inc.; and the federal government.  This decision was accompanied by four dissents.