USPTO’s Administrative Patent Judges Not Constitutionally Appointed

By David Forman

The Appointments Clause of the U.S. Constitution governs the appointment of “Officers of the United States.”  U.S. Const. art. II, §2, cl. 2 provides:

[The President] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

Unlike other government employees, Officers of the United States can only be hired under the Appointments Clause.  An “Officer of the United States,” as opposed to a mere employee, is someone who exercises significant authority pursuant to the laws of the United States.  The Appointments Clause ensures that individuals in these positions of significant authority are accountable to elected Executive Branch officials.  That clause contemplates two kinds of officers—principal and “inferior” (although the term “principal” is not used).  Principal officers must be appointed by the President “by and with the Advice and Consent of the Senate,” whereas Congress may delegate the appointment of “inferior” officers to the President, the Courts of Law, or the Heads of Departments.

The Administrative Patent Judges (“APJ”) of the USPTO’s Patent Trial and Appeal Board (“PTAB”) are appointed by the Secretary of Commerce — a Head of Department — in consultation with the Director of the USPTO.  35 U.S.C. § 6(a).  The question of whether the PTAB APJs were properly appointed under the Constitution depends on whether they are “officers” whose appointments must satisfy the requirements of the Appointments Clause, or merely non-officer employees.  Based on decisions in other Appointments Clause court cases, the government, the parties, and the Federal Circuit all agreed that PTAB APJs are officers who must be appointed consistent with the Appointments Clause.  The Federal Circuit then considered whether they are principal or inferior officers.  Arthrex had argued that the APJs were not constitutionally appointed because the they are principal officers who must be, but were not, appointed by the President with the advice and consent of the Senate.

The Supreme Court has explained that whether one is an inferior officer depends on whether one has a “superior.”[1]  Inferior officers’ work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.  Although there is no exclusive criterion for distinguishing between principal and inferior officers, the Supreme Court has emphasized three factors: (1) whether an appointed official has the power to review and reverse the officers’ decision; (2) the level of supervision and oversight an appointed official has over the officers; and (3) the appointed official’s power to remove the officers.

The Federal Circuit held that in light of their legal rights and responsibilities, APJs are principal officers.  Regarding the power to review and reverse the officers’ decision, the Federal Circuit noted that the only Presidentially-appointed officers who provide direction to the USPTO are the Secretary of Commerce and the Director.  Neither Presidential appointee exercises sufficient direction and supervision over APJs to render the APJs inferior officers.  In particular, neither of these Presidentially-appointed officers has independent statutory authority to review a final written decision by the APJs before the decision issues.

Regarding the level of supervision and oversight, the Federal Circuit concluded that the Director has some supervisory powers that could weigh in favor of a conclusion that APJs are inferior officers.  However, regarding the appointed official’s power to remove the officers, the Court of Appeals found that both the Secretary of Commerce and the Director lack unfettered removal authority under the law.  APJs may be removed “only for such cause as will promote the efficiency of the service,” a standard that gives them substantial Civil Service protections. 5 U.S.C. § 7513(a).

Considering these factors (the lack of any Presidentially-appointed officer who can review, vacate, or correct decisions by the APJs, combined with the limited removal power), the Court concluded that APJs are principal officers, and therefore their appointment was not constitutional.  Because their appointments were not constitutionally valid, theAPJs’ legal decisions are not constitutionally valid, either.

The Court then searched for a remedy to rescue appointments of APJs to the PTAB.  After concluding that the protections from removal under 5 U.S.C. § 7513(a) cannot be constitutionally applied to APJs, the Federal Circuit severed and eliminated those Civil Service protections as applied to APJs.  Without limits on their removal, the APJs are deemed to be inferior officials who can be appointed by the Secretary of Commerce, according to the Court’s rationale.  The Federal Circuit therefore vacated the Arthrex decision and remanded for re-adjudication by a different panel of the PTAB, which now could be removed at will by the Secretary of Commerce and thus would now be constitutionally formed.

The question immediately arose as to what is the status of other cases pending before the PTAB.  The very next day after Arthrex was decided, the Federal Circuit issued a precedential order holding that parties are not entitled to relief under Arthrex unless they had raised an Appointments Clause challenge in their opening briefs (or motions filed beforehand).  Customedia Techs., LLC v. Dish Network Corp. (Fed. Cir. Nov. 1, 2019).  According to the Court, the constitutional challenge in all previous cases where it was not raised is considered waived – a conclusion that itself is open to fair debate.  This still leaves this defense available in recent PTAB decisions that are currently being appealed, or that are about to be appealed.

The Arthrex decision raises other questions.  Indeed, after oral argument in Polaris Innovations Ltd. v. Kingston Technology Co., Inc., No. 2018-1768 (Fed. Cir.) (argued two business days after Arthrex issued), that panel ordered supplemental briefing on several questions:

(1) what level of supervision and review distinguish a principal from an inferior officer;

(2) whether severing the application of Title 5’s removal restrictions with respect to APJs under 35 U.S.C. §3(c) sufficiently remedies the alleged unconstitutional appointment at issue in these appeals;

(3) whether, and how, the remedy for an Appointments Clause violation differs when it stems from an unconstitutional removal restriction, rather than an unconstitutional appointment itself; and

(4) whether severing the application of Title 5’s removal restrictions with respect to APJs under 35 U.S.C. §3(c) obviates the need to vacate and remand for a new hearing.

Adding to the uncertainty, the government intends to seek rehearing of the Arthrex decision by the entire Federal Circuit sitting en banc, and it would not be surprising if the issue is eventually considered by the Supreme Court.

Meanwhile, on November 19 the U.S. House of Representatives’ Committee on the Judiciary held hearings on the effect of the Arthrex decision, where witnesses discussed ways that the Appointments Clause problem could be corrected by legislation.[2]  For example, instead of taking Civil Service protections away from APJs, the law could be changed to give the Director of the USPTO power to review all PTAB final written decisions.

Thus, the status of the PTAB and its decisions remains uncertain.  Did giving the Secretary of Commerce power to remove APJs at will really solve the Appointments problem?  What will happen to cases currently on appeal from the PTAB?  Will the USPTO take advantage of its new removal power to fire some PTAB APJs?  Stay tuned for further developments in the near future.

[1] Edmond v. United States, 520 U.S. 651, 662–63 (1997).