Federal Circuit Extends Arthrex Holding to Ex Parte Proceedings

On July 7, the U. S. Court of Appeals for the Federal Circuit (CAFC), in In re: Boloro Global Limited, granted a motion by Boloro Global Limited (Boloro) to vacate and remand the decisions of the Patent Trial and Appeal Board (the Board) in three ex parte appeals that affirmed an examiner’s rejection of claims of Boloro’s patent applications.

Each of Boloro’s U.S. Patent Applications Nos. 14/222,613, 14/222,615, and 14/222,616 were rejected by the patent examiner as being unpatentable under 35 U.S.C. § 101. On appeal, the Board affirmed the examiner’s rejections and denied rehearing. In August 2019, Boloro appealed the decisions to the CAFC. Subsequently, in October 2019, the CAFC issued a decision in Arthrex, Inc. v. Smith & Nephew, Inc., which was an appeal from an inter partes review, holding that administrative patent judges (APJs) were not constitutionally appointed.  In January 2020, Boloro filed a motion to vacate the Board’s decisions and remand for further proceedings consistent with the CAFC’s decision in Arthrex.

Boloro’s Arguments

In its motion to vacate, Boloro argued that the “APJs who presided over the hearings in the ex parte appeals and issued the final decisions in those applications were ‘principal officers’ under the Appointments Clause, yet were neither appointed by the President nor confirmed by the Senate.” Thus, according to Boloro, the proper remedy is to “vacate and remand the Board’s decision without reaching the merits” for a new hearing with a new panel of APJs. Boloro recognized that the Board in Arthrex was presiding over an inter partes review, as opposed to an ex parte review, as in the present case, but noted that APJs are “principal officers” for purposes of both inter partes and ex parte reviews because they exercise “significant authority pursuant to the laws of the United States” in both types of review. For example, Boloro noted that “APJs in ex parte appeals carry out similar functions [to APJs in inter partes appeals] when they hear oral arguments under 37 C.F.R. § 41.47 and, at the close of the appeal proceedings, issue final written decisions containing fact findings and legal conclusions.”

USPTO Responds

The Director of the United States Patent and Trademark Office (USPTO) argued that Board decisions in ex parte reviews “implicate different remedial considerations than the [CAFC addressed] in Arthrex, and Arthrex’s remedy of a vacatur and remand is unnecessary and unwarranted” in such cases. Noting that the CAFC in Arthrex vacated a Board decision in an inter partes review, i.e. “the very type of proceeding over which the Arthrex panel concluded that Senate-confirmed officers had insufficient control”, the Director explained that the Boloro case involved an ex parte examination, i.e. “a process in which the USPTO Director has always had the ability to unilaterally grant the patent applicant all the relief he seeks by issuing the patent after examination of the claims.” Thus, according to the Director, “[t]here is no need to vacate and remand for new proceedings before at-will removable APJs where the Director already had adequate control over the examination process and could have accepted the patent applicant’s arguments in the original examination.”

The Director also noted that Boloro forfeited any Appointments Clause challenge by failing to raise it before the USPTO and that a remand based on Arthrex was premature because it was unclear whether Arthrex would undergo further review in the CAFC or the Supreme Court.

CAFC Order

Citing Arthrex and VirnetX Inc. v. Cisco Sys., Inc., the CAFC noted that it had previously held that the appropriate remedy for a constitutional violation, such as APJs not being constitutionally appointed at the time of the Board’s final decision, “was to vacate the Board’s decision and to remand for the purpose of reassigning the matter to a different panel of APJs for a new hearing and decision.” The CAFC acknowledged the Director’s argument that the same remedy should not be applied to both inter partes and ex parte proceedings because the Director had “complete control over the initial examination” in ex parte proceedings. However, the CAFC concluded that, since the Director “conceded that the APJ’s appointments were unconstitutional,” there was “no principled reason to depart…from the resulting remedy applied in Arthrex and VirnetX.” Thus, the CAFC granted Boloro’s motion to vacate and remand to the Board for proceedings consistent with the Arthrex decision.