Federal Circuit’s Decision on PTAB Judge Appointments May Affect Over 200 AIA Reviews

November 8, 2019

The Federal Circuit has held in Arthrex v. Smith & Nephew that the appointment of administrative patent judges (APJs) by the Patent Trial and Appeal Board (PTAB) is unconstitutional. While the decision largely preserved the status quo by leaving the PTAB essentially intact, many cases may yet be affected, as Arthrex requires a rehearing by a different PTAB panel in some recently decided America Invents Act (AIA) reviews that are still within the appeal window. Now, as parties and stakeholders assess the decision’s impact, an RPX analysis indicates that Arthrex may affect more than 200 AIA reviews and over 50 active litigation campaigns in which the patents challenged in those reviews have been asserted.

A recent concurrence in another case has since highlighted the strain that Arthrex may put on the PTAB itself, noting that the decision’s remedy of remanding unconstitutionally decided final written decisions to a different panel would “impose[] large and unnecessary burdens on the system of inter partes review [(IPR)], requiring potentially hundreds of new proceedings” (Bedgear v. Fredman Bros. Furniture (2018-2082), nonprecedential opinion; Dyk., J., concurring).

The Federal Circuit’s Decision

As detailed in a recent RPX analysis, the Federal Circuit held in Arthrex that PTAB APJs, as appointed under the system previously in place, were “principal officers” under the Constitution’s Appointments Clause—which would have required Senate confirmation. In making that determination, the court considered a series of factors addressing the “extent of direction or control” that the Secretary of Commerce and USPTO Director have over the APJs, finding that the question turned on whether the Director had sufficient power to remove them. The court found that he lacked that authority under a statutory provision requiring that APJ removals only be “for . . . cause”. Rather than eliminate the PTAB altogether, the Federal Circuit chose a more targeted solution to the constitutionality issue by severing that portion of the statute restricting the Director’s removal authority over APJs, rendering them inferior officers.

Significantly, the Federal Circuit limited the scope of its holding—requiring that an affected AIA review be reheard by a new panel—to those reviews in which “final written decisions were issued and where litigants present an Appointments Clause challenge on appeal”. This restriction indicates that Arthrex will also impact already-appealed AIA reviews in which opening appeal briefs have not yet been filed, as well as AIA reviews that have not yet been appealed but are still within the appeal window. By statute, an AIA review notice of appeal must be filed “no later than sixty-three (63) days after the date of the final Board decision”, with that period resetting when the Board issues a decision on a request for a rehearing.

The Impact of Arthrex: An Initial Estimate from the Appellee

In a supplemental brief requested by the Federal Circuit, appellee Smith & Nephew asserted that “there are over 160” IPRs that may be subject to reversal as a result of the Federal Circuit’s holding. As described by Smith & Nephew, this includes at least 19 IPRs on appeal in which the parties preemptively raised Appointments Clause challenges in their opening appellate briefs, at least 100 IPRs with active appeals in which the appellants have not yet filed opening briefs, and at least 50 IPRs in which final decisions adverse to the patentee have issued and that are still within the appeal window.

RPX’s Analysis Shows That Over 200 AIA Reviews May Be Affected

An RPX analysis provides an even higher number, revealing that at least [1] 207 AIA reviews may be subject to rehearing under Arthrex—affecting patents asserted in at least 52 litigation campaigns, including 31 campaigns waged by NPEs and 21 operating company campaigns. Those AIA reviews break down as follows:

  • 34 IPRs with active patentee appeals for which opening briefs have been filed that cite the Appointments Clause. (No other types of AIA review appeared in this part of the data.) The data cover appeals with briefs filed through October 31, including three appeals, covering five IPRs, with qualifying opening briefs that were missing from Smith & Nephew’s data despite having issued well before October 29 (the day Smith & Nephew filed its brief). The data also include an additional three appeals, covering another nine IPRs, in which opening briefs citing the Appointments Clause were filed the day after the Arthrex decision.
  • 98 AIA reviews with active patentee appeals in which no opening briefs have been filed. These data cover appeals active as of October 31.
  • 75 AIA reviews with appealable final written decisions or decisions on rehearing. This category includes AIA reviews that were within the 63-day appeal window as of October 31.

Limiting the data to IPRs only, as in Arthrex’s brief, RPX’s analysis indicates that at least 187 IPRs may be subject to rehearing under Arthrex. Applying the same criteria as above, this breaks down as follows:

  • 34 IPRs with active patentee appeals for which opening briefs have been filed that cite the Appointments Clause.
  • 93 IPRs with active patentee appeals in which no opening briefs have been filed.
  • 60 IPRs with appealable final written decisions or decisions on rehearing.

To obtain the underlying data for this analysis, please email arthrex_data@rpxcorp.com.

RPX’s Methodology:

RPX assessed the number of AIA reviews possibly subject to rehearing by leveraging its litigation database and proprietary metadata and performing an additional layer of manual review. Cases were evaluated using the following methodology:

  • To count AIA reviews already on appeal in which opening briefs have been filed that raise the Appointments Clause issue, RPX compiled a dataset of opening briefs for all active Federal Circuit appeals of AIA reviews and filtered that list to include only appeals of PTAB final decisions adverse to the patentee. [2] RPX then manually reviewed those briefs, excluded all but those that asserted the unconstitutionality of APJ appointments under the Appointments Clause, and identified the underlying AIA reviews at issue in those appeals. (See Uniloc v. Facebook, discussed further below (vacating and remanding an appealed IPR after the appellant cited the Appointments Clause in its opening brief).)
  • To count AIA reviews already on appeal where the patent owner has not yet filed an opening brief, RPX filtered its Federal Circuit data based on human-curated metadata in order to count only appeals filed by patent owners and eliminate cases with opening briefs, excluding cross-appeals and accounting for consolidations. RPX then totaled the IPRs appealed in those proceedings.
  • To count AIA reviews still within the appeal window as of Arthrex’s issuance, RPX identified those with final written decisions or decisions on rehearing that issued within 63 days of October 31, [3] using manually determined outcome data to limit that set of cases to those with decisions adverse to the patentee. RPX excluded decisions granting adverse judgments and final written decisions in which claims were cancelled but replaced with new claims (i.e., those in which a patentee’s motion to amend was granted).

What Comes Next

It is not yet clear if the appellees in Arthrex will move for rehearing en banc, the deadline for which is December 16. However, it is likely that the USPTO will issue guidance even before the Federal Circuit issues its mandate in Arthrex. Indeed, USPTO Director Andrei Iancu has stated that the Patent Office is watching the case “very, very carefully” and “working closely with the Department of Justice”.

Meanwhile, the Arthrex decision has already begun to affect some existing proceedings. On October 31, the same day that the decision issued, the Federal Circuit vacated and remanded a March 2018 final decision from an IPR filed by Facebook against Fortress Investment Group LLC subsidiary Uniloc 2017 LLC (IPR2016-01756) because the patent holder had raised the Appointments Clause issue in its January 2019 appellate brief (2018-2251).

Parties have also begun to file notices of appeal citing Arthrex in certain AIA review proceedings, including two covered business method reviews filed by Miami International Holdings against Nasdaq (CBM2018-00021, CBM2018-00031) and two IPRs filed by Zscaler against Symantec (IPR2018-00912, IPR2018-00913). Furthermore, parties have started to preemptively cite Arthrex in attempts to avoid waiving an Appointments Clause challenge; for example, on October 31, patent owner Biogen filed a sur-reply in an IPR filed by Mylan and Sawai (IPR2018-01403) in which it cited Arthrex and reserved its right to raise the Appointments Clause issue, as did patent owner Nike in a preliminary response filed on November 1 in a Puma IPR (IPR2019-01342).

Additionally, one of the Federal Circuit appellants that has cited the Appointments Clause issue in its opening brief—Quarterhill Inc. subsidiary Polaris Innovations Limited—has since questioned the scope of the decision in oral arguments before the Federal Circuit. On November 4, Polaris reportedly asserted that severing the statutory provisions on removal was not enough to cure the constitutional defect; rather, the NPE argued, a process where the USPTO Director reviews panel decisions must be established. Since the appeals court allegedly lacks the authority to do so, Polaris asserted, Congress must step in. This argument was apparently met with pushback from Circuit Judge Todd M. Hughes, who noted during oral arguments that the Federal Circuit had adopted the same approach as other courts addressing similar Appointments Clause issues. The next day, the panel issued a per curiam order denying petitioner-appellant Kingston’s motion to remand.

RPX will continue to track the impact of Arthrex in the weeks and months ahead, as the USPTO, Federal Circuit, and litigants probe the extent of the decision’s scope. For a detailed overview of the court’s analysis, see “Federal Circuit Deems PTAB Judge Appointment Process Unconstitutional, Requiring Rehearings for Certain AIA Reviews” (November 2019).


[1] RPX’s methodology provides a lower limit on the number of AIA reviews affected, because it does not count appeals where petitioner-appellant filed an opening brief making an Appointments Clause challenge (see Kingston v. Polaris, discussed in Footnote 2) or AIA reviews where the time to appeal would be tolled in view of a pending request for rehearing of a final written decision.

[2] An open question remains as to whether petitioner-appellants may take advantage of Arthrex to have a final written decision upholding claims vacated and the proceeding reheard.  See Kingston v. Polaris (per curiam order, 2018-1778), in which a petitioner’s motion to remand was denied, though this was likely because the petitioner-appellant had not raised an Appointments Clause challenge in its opening appeal brief.

[3] As noted above, this is the statutorily defined appeal window for PTAB final written decisions and decisions on rehearing.

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