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Delays, Denials and Uncertainty: Developments in the Arthrex Redo Case Line

The Halloween 2019 decision, Arthrex v. Smith & Nephew,[1] created a new right to rehearing in the Patent Trial and Appeal Board (“PTAB”), and has sent ripples through the judiciary and legislative branches that will continue to be felt for the foreseeable future.  In the case, the Federal Circuit opinion announced that the appointment of the PTAB’s administrative patent judges (“APJs”) – who preside over the inter partes review (“IPR”) proceedings at the United States Patent & Trademark Office – violated the Appointments Clause of the Constitution.[2]  The decision resolved that violation by striking down APJ removal protections from the Patent Act;[3] found that its resolution could not cure PTAB decisions such as the one at issue and that a remand for rehearing was required;[4] and that this and other such future rehearings must be conducted by a new panel of APJs.[5]

Although the Federal Circuit limited the availability of Arthrex rehearings to those cases that had both been pending appeal at the time of the Arthrex decision and where the appealing party had raised the Appointments Clause during appeal briefing, the court has faced a steady stream of Arthrex-type appeals.  The list below represents a number of pertinent developments regarding the Arthrex appeals, as well as further attempts by the court to elaborate on them:

  1. Customedia Tech., LLC v. Dish Network Corp., 941 F.3d 1173 (Fed. Cir. 2019), decided November 1, 2019: This case, decided the day after Arthrex, denied the availability of the Arthrex rehearing to a party who had failed to raise the Appointments Clause issue in its opening brief or in a motion filed prior to opening briefs. Instead, Customedia had attempted to raise the challenge on a notice of supplemental authority.
  2. Bedgear, LLC v. Fredman Bros. Furniture Co., Inc., 783 Fed. Appx. 1029 (Fed. Cir. Nov. 7, 2019): The decision itself was a one-page grant of the Arthrex rehearing, but Judge Dyk’s concurrence raised a number of points that have been used in future discussions criticizing the Arthrex Judge Dyk addressed the extra burden the Arthrex decision could place on the PTAB by requiring rehearings.  In Judge Dyk’s view, the severance of the removal provisions that cured the Appointments Clause issue could have been retroactively applied, so no rehearings would be necessary.  At the heart of Judge Dyk’s concurrence was his view on the judiciary’s role of interpreting what the law is, not making the law; and that retroactive application is a natural characteristic of this role.
  3. Ciena Corp. v. Oyster Optics, LLC, No. 2019-2117, 2020 WL 2124762 (Fed. Cir. May 5, 2020): Originally decided as a nonprecedential order on January 28, 2020, this case was redesignated the previous month. In the opinion, the Federal Circuit held that IPR petitioners do not have the right to raise the Appointments Clause issue on appeal unless the issue was first raised before the PTAB.   That is, because a petitioner affirmatively requests that the Board adjudicate through its petition, it forfeits any Appointments Clause challenge.  The court rejected the argument that structural constitutional concerns, such as separation of powers, require that a court forgives a party’s waiver or forfeiture of claims, instead concluding that such forgiveness is up to the court’s discretion.  In choosing not to exercise its discretion, the court noted that petitioners have an alternative forum to challenging patent claims – the district court.  The Court redesignated the opinion upon the Patent Office’s request, which argued that since the Ciena decision petitioners have repeatedly appealed on the Appointments Clause issue without raising it with the PTAB.
  4. Caterpillar Paving Products Inc. v. Wirtgen Am., Inc., No. 2020-1261, 2020 WL 2176034 (Fed. Cir. May 6, 2020): The Federal Circuit reiterated that the window of eligibility for an Arthrex rehearing is quite narrow. The Federal Circuit denied appellant Caterpillar’s motion to vacate and remand the case, concluding that Arthrex did not compel a remand in this case because the opinion in Arthrex issued before the PTAB’s final written decision.  Caterpillar argued that even though the Arthrex decision had issued before the PTAB had issued its final written decision, the Board’s “thinking and conclusions” throughout the proceeding up until the Arthrex decision remained uncured.  The court was unconvinced, and noted that this argument had also been rejected by the Arthrex  Thus, the Arthrex rehearing remains limited to those cases where the final written decision has already been issued and where the party raised the Appointments Clause challenge in its appeal brief.

A number of events in the Arthrex proceeding itself have determined the current status of these rehearings.  In the months following, the Federal Circuit has refused to reconsider the decision en banc, although four of the judges dissented.  It has also refused to stay its mandate requiring the PTAB to proceed on the rehearings while the Arthrex parties await the Supreme Court’s decision on Arthrex’s petition for certiorari, despite both parties supporting such a stay.  The pending April 9, 2020 petition involves a separate patent and proceeding and does not address the constitutionality of the Federal Circuit’s Appointments Clause decision, but Arthrex is expected to file a separate petition on the Appointments Clause issue sometime soon.  The petition does, however, address a relevant issue of whether forfeiture should apply when there has been an intervening change in law while an appeal is pending.

In the meantime, Chief Administrative Patent Judge Scott R. Boalick of the PTAB issued a general opinion at the start of the month holding all the rehearings in abeyance until the Supreme Court has the chance to consider the constitutional questions raised in Arthrex.  In view of Judge Boalick’s order, remanded cases will now be delayed for several months or even a year until the Supreme Court resolves this issue.  In turn, this means that even if the Federal Circuit grants a party’s motion for vacatur and remand, there is no guarantee as to when a party may get a date for a second hearing thereby putting both petitioners and patent owners in limbo.

On the legislative side, although a House IP Subcommittee hearing was held on the Arthrex case in the weeks following the decision, Congress has preferred to focus on other (understandably) pressing issues and let the situation in the judiciary play out.

The next chapter in the Arthrex story unquestionably lies with the Supreme Court.  While the Court could close the book on the whole issue with a definitive ruling, anything less may mean that the legislative branch has to step in.  Not only are hundreds of IPR cases currently hanging in limbo, the job security of the APJs – who are now fireable at will – remains uncertain.  Until the Supreme Court makes a move, however, it appears that nothing further will be done.

[1] 941 F.3d 1320 (Fed. Cir. 2019).

[2] Id. at 1335.

[3] Id. at 1338.

[4] Id. at 1340.

[5] Id.