Federal court declares patent board structure unconstitutional

A three-judge panel of the United States Court of Appeals for the Federal Circuit on October 31 held in Arthrex Inc. v. Smith & Nephew Inc. et al. that the structure of the Patent Trial and Appeal Board (PTAB) violates the Appointments Clause of the United States Constitution.
Judges Kimberly Moore, Raymond Chen, and Jimmie V. Reyna identified a structural flaw in the PTAB’s statutory scheme for appointing its administrative patent judges (APJs). Under the faulty system, the United States secretary of commerce appointed APJs. Once appointed, APJs enjoyed for-cause removal protections that only permitted removal by the secretary or the director of the U.S. Patent and Trademark Office for “such cause as will promote efficiency of the service.”
The judges held that APJs exercise significant authority that qualifies them as principal, rather than inferior, officers. As such, APJs must be directly appointed by the president with the advice and consent of the United States Senate pursuant to the Appointments Clause.
Instead of changing the method of appointing APJs, however, the court cited precedent set forth in Free Enterprise Fund v. Public Company Accounting Oversight Board to propose removing APJs’ for-cause removal protections in order to classify them as inferior officers. Without protections against removal, the judges stated that APJs would be considered inferior officers subject to at-will removal by the director of the U.S. Patent and Trademark Office.
“We believe that this, the narrowest revision to the scheme intended by Congress for reconsideration of patent rights, is the proper course of action and the action Congress would have undertaken,” wrote Judge Kimberly Ann Moore.
The court’s decision is likely to result in the rehearing of 50 to 70 cases before the board.
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