Federal Circuit Expands Arthrex To Ex Parte Appeals From Original Prosecution
On July 7, 2020, the United States Court of Appeals for the Federal Circuit (“CAFC”) issued an Order on Motion vacating and remanding the underlying decisions in ex parte appeals of the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office (“USPTO”) affirming the examiner’s rejection of patent application claims. In re Boloro Global Ltd., No. 2019-2349 (Fed. Cir. July 7, 2020). In doing so, the CAFC applied the reasoning from its decisions in Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019) and VirnetX Inc. v. Cisco Sys., Inc., No. 2019-1671, 2020 WL 2462797 (Fed. Cir. May 13, 2020), which held that administrative patent judges (“APJs”) were “principal officers” and not constitutionally appointed at the time the PTAB issued its final decisions in the underlying inter partes review and re-exam proceedings, respectively.
In Arthrex, the CAFC fashioned a fix—severing the portion of the Patent Act restricting removal of the APJs—that, per the CAFC, meant that APJs were now “inferior officers” and thus constitutionally appointed going forward (i.e., as of the time of the Arthrex decision). The CAFC also held that the appropriate remedy was to vacate the PTAB’s decision and to remand for the purpose of reassigning the matter to a different panel of (now constitutionally appointed) APJs for a new hearing and decision.
Since Arthrex, the CAFC has continued to apply its holding to other post-grant proceedings, including inter parte and ex parte re-exams. See Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019); In re JHO Intellectual Property Holdings LLC, No. 2019-2330 (Fed. Cir. June 18, 2020).
And, in Boloro Global, the CAFC went one step further: applying the holding to ex parte appeals stemming from original patent prosecution. The USPTO Director argued that appeals from original prosecution were different than post-grant proceedings (such as inter partes review and re-exams) because the underlying patent application had not yet issued and the Director possessed “complete control over the initial examination” and could at any time prior to the PTAB proceedings have directed the issuance of Boloro’s patents but did not, consistent with the PTAB’s subsequent decision. The CAFC rejected this argument, noting that the USPTO Director conceded that, following the reasoning of the Supreme Court’s decision in Freytag v. Comm’r, 501 U.S. 868, 882 (1991), as understood in VirnetX, “APJs were principal officers for purposes of all governmental functions of their office.”
This decision marks perhaps the high-water mark of the Arthrex fall-out, with every decision rendered by an APJ before Arthrex—regardless of the underlying proceeding—now subject to being vacated and remanded. However, this is likely not the end of the story, as Arthrex (and other cases) make their way to the Supreme Court.