One Way or Another, Arthrex Promises to Put the PTAB on Trial

For weeks now I have been asking the United States Patent and Trademark Office (USPTO) to confirm how many Administrative Patent Judges (APJs) are currently employed by the Office, a request that predates the Federal Circuit’s controversial Arthrex decision, but which was renewed after the decision issued. For reasons that I cannot explain, the Office refuses to provide an answer to what seems to be a straightforward and legitimate question: How many APJs are currently employed by the USPTO?

Regardless of the USPTO’s reluctance to identify the number of APJs employed, it seems safe to say that the employment rights and futures of several hundred APJs hang in the balance as the result of the Federal Circuit’s decision in Arthrex, which found that the hiring of APJs violated the Appointments Clause of the U.S. Constitution. The Federal Circuit did, however, attempt to provide a gift to the Office by rewriting the section of the America Invents Act (AIA) they found to create the problem, and by so doing turned APJs into inferior officers.

In order to do so, the Federal Circuit turned those uncertain number of APJs into employees-at-will, which allows for them to be fired by the Director of the USPTO. This is significant because certain APJs have not been willing to get on board with changes implemented by Director Iancu. The belief of those APJs who have not been “team players” is that they are judges and are not controlled by and do not answer to Director Iancu. Well, with the Federal Circuit’s decision in Arthrex that employment dynamic changed overnight.

‘Far From Resolved’

While it cannot be debated that the Arthrex decision turns APJs into inferior employees who must answer to the Director, other consequences of the decision remain hotly debated, with some believing little or nothing has changed and others believing the decision fundamentally undermines the fabric of the Patent Trial and Appeal Board (PTAB) on which the APJs serve.

If APJs were not properly appointed, thereby making their appointments in violation of the U.S. Constitution, how is it possible that a single three-judge panel of the Federal Circuit could issue a decision to re-write a portion of the AIA that fundamentally changes the employment relationship of those APJs to and with the United States Patent and Trademark Office (USPTO)?

“If APJs were not properly appointed yesterday, they cannot not magically be appointed properly today just because a court read their employment rights out of a statute without their representation,” Russ Slifer, former Deputy Director of the USPTO, told IPWatchdog in the immediate aftermath of the Arthrex decision. “I believe this issue is far from resolved.”

Slifer is right on point, as evidenced by reports that Director Iancu has been having frequent – perhaps daily – meetings with other Administration officials in an effort to understand the ramifications and chart a path forward. And just this afternoon, the House Subcommittee on Courts, Intellectual Property, and the Internet held a hearing to discuss the effects of Arthrex on the PTAB, during which Subcommittee Chair Hank Johnson (D-GA) said he personally finds the Arthrex remedy “inconsistent with the idea of creating an adjudicatory body to have judges who have no job security. It goes against the idea of providing independent, impartial justice if a judge is thinking about his or her livelihood while also weighing the facts of a case.”

Clearly, this is far from resolved.

The Prospect of Individual Liability

It is no exaggeration to characterize the Federal Circuit’s decision in Arthrex as fundamentally and unilaterally turning APJs into employees-at-will who can be fired by USPTO Director Andrei Iancu. How can it possibly be appropriate for a court on any level to so fundamentally rewrite an unconstitutional statute? That isn’t the role of the Judiciary, period. And particularly so where these APJs who had been vested with such extraordinary powers have been wreaking havoc on patent property rights. These unconstitutional “officers” have destroyed tremendous value, and a great many of them would never have been able to achieve a Presidential nomination and confirmation by the Senate given their extreme inexperience at the time of their appointments.

Regardless of whether the Federal Circuit had the right to unilaterally make several hundred APJs employees-at-will, the far larger problem that could and almost certainly will face these individuals is the prospect of individual liability for the actions they took while not properly appointed.

Why would an unconstitutionally hired APJ enjoy any kind of immunity? In other words, could a patent owner who lost a patent bring a lawsuit against individual APJs personally? Normally officials would have at least qualified immunity, but how could an APJ that wasn’t even supposed to have the job, who was unconstitutionally hired, be entitled to any immunity whatsoever?

Likely Test Cases

Before you consider this ridiculous, consider former APJ Matt Clements who represented Apple in patent litigation matters and then shortly after being hired by the Office to serve on the PTAB started sitting on, hearing and ultimately deciding inter partes review (IPR) petitions filed by Apple. Not surprisingly, across the several dozen Apple petitions where Clements was on the panel, Apple did unusually well. After we reported this matter, Clements was removed from Apple cases and then shortly thereafter left the PTAB altogether. Upon leaving the PTAB, Clements was hired by Apple as an in-house attorney.

I know there are patent owners who have lost patents at the hands of the PTAB considering whether there is any lawsuit they can file that might allow them another bite at the apple, so to speak, because the APJs that took their patents away were unconstitutional “officers” acting without authority. The Federal Circuit in the Arthrex decision said the Appointments Clause argument could be waived, but we can almost certainly expect litigation to test that theory.

Still, it would seem that patent owners who lost their patents as the result of Apple petitions involving APJ Clements would be in the best position to file a lawsuit.

And don’t forget the St. Regis Mohawk tribe. We know that those unconstitutionally hired APJs had secret conversations relating to how to decide those cases with supervisors and other APJs. We know this thanks to Freedom of Information Act requests and responses. In fact, what the USPTO refused to provide under the deliberation exception is most telling. Communications denied as deliberative between APJs not assigned to the St. Regis Mohawk cases raise serious questions of inappropriate collusion once immunity is removed.

The Whole System on Trial

Even if unconstitutionally hired APJs do have some level of immunity, enterprising patent owners that have been targets of efficient infringers and have been unceremoniously treated to the fundamental unfairness of the PTAB now have the opportunity to put the APJs of the PTAB on trial. Does anyone really think that won’t happen regardless of the likelihood of success? The opportunity to litigate the mistreatment of patent owners by APJs who have a vested interest in instituting cases so they can make their quota will prove too great an opportunity to put the entire system on trial.

Whatever the fallout of the Arthrex decision, expect great scrutiny to be placed on the PTAB generally, and more specifically, the APJs themselves.

Stay tuned for a full report on the House IP Subcommittee’s hearing today on what to do about Arthrex, which included testimony from four renowned IP scholars.

Image Source: Deposit Photos
Image ID: 38780871
Copyright: alancrosthwaite