In Arthrex II, CAFC Rejects Arthrex’s Constitutional and FVRA Arguments Challenging Director’s Denial of Review

“Although a lower officer generally cannot issue a final agency decision, he can perform the functions and duties of an absentee. [presidentially-appointed, senate-confirmed] temporary agent, acting. – Chief Federal Circuit Judge Kimberly Moore

On May 27, the United States Court of Appeals for the Federal Circuit issued a decision in Arthrex, Inc. v. Smith & Nephew, Inc. (Arthrex II) upholding both a written final decision rendered by the Patent Trial and Appeal Board (PTAB) invalidating the patent claims held by Arthrex, as well as several arguments raised by Arthrex challenging the refusal to examine the director as decided by the Commissioner of Patents of the United States Patent and Trademark Office. The opinion, written by Chief Justice Kimberley Moore, found that the USPTO did not violate the mandate of the United States Supreme Court by Arthrex I despite the fact that no President-appointed, Senate-confirmed Director was in place at the USPTO when the agency denied Arthrex’s request for Director’s review.

CAFC: Hirshfeld’s denial gave Arthrex remedy ordered by SCOTUS in Arthrex I

Last June, the Supreme Court rendered its decision in Arthrex I in which he upheld a Federal Circuit ruling that the process for recruiting Administrative Patent Judges (APJs) to the PTAB violated the Appointment Clause of the U.S. Constitution because APJs wielded the power of top executives. SCOTUS, however, amended the constitutional complaint by declaring unenforceable a law preventing director review of PTAB decisions. Then, in October, the USPTO issued an order signed by Drew Hirshfeld, the Commissioner of Patents who at the time performed the functions and duties of the Director of the USPTO, denying Arthrex’s request for Director’s review. .

In oral arguments before the Federal Circuit in late March, Arthrex argued that Hirshfeld’s lack of presidential nomination and Senate confirmation presented the same decision-making framework that the Supreme Court ruled unconstitutional in Arthrex I. Until the confirmation by the Senate of Kathi Vidal, the current director of the USPTO, no principal officer existed to properly delegate the review process from the director to the Commissioner of Patents according to Arthrex. During questioning, Chief Justice Moore appeared skeptical of the position taken by the USPTO and Smith & Nephew that all director functions were delegable and that the fact that President Biden could have appointed a director by acting would address issues raised by Arthrex under the Appointment Clause and the Federal Vacancies Reform Act (FVRA).

However, the Federal Circuit decision written by Chief Justice Moore disagreed with Arthrex’s position that it never obtained the remedy ordered by the Supreme Court in Arthrex I. “Although a lower officer generally cannot issue a final agency decision, he can perform the functions and duties of an absentee. [Presidentially-appointed, Senate-confirmed] officer on a temporary and interim basis,” Chief Justice Moore wrote.

Chief Justice Moore: “Arthrex’s appointment clause challenge is going headlong into eaton

Much of the Federal Circuit’s reasoning on challenging Arthrex’s appointment clause followed the Supreme Court’s 1898 decision in United States vs. Eaton, a case on which Smith & Nephew relied heavily during oral argument. In eaton, the Supreme Court rejected a consul general appointment clause challenge against Siam’s unilateral appointment of a missionary as vice consul general before leaving office for health reasons. The Federal Circuit concluded that this case was indistinguishable from eatonnoting that the decision of the Supreme Court Arthrex I The ruling ordered the referral to the Acting Director of the USPTO, who may be a junior officer appointed without Senate confirmation under 5 USC § 3345(a)(3).

The Federal Circuit rejected Arthrex’s arguments that eaton applied only to situations where Congress creates a temporary mechanism for presidential appointments, finding that Congress had previously authorized the president, acting through the director, to delegate the director’s duties under 35 U.S.C. § 3(b)(3)(B). The Federal Circuit also rejected Arthrex’s argument that the Commission was not serving as director “for a limited time” such as the appointment in eatonbelieving that Arthrex had already admitted that Hirshfeld’s term was limited by the time the Senate confirmed President Biden’s nomination as Director of the USPTO, and that the timeframe in which Hirshfeld denied Arthrex’s request of review by the director after assuming the functions and duties of the director was 268 days, shorter than the duration of the appointment at issue in eaton.

The Federal Circuit then dismissed Arthrex’s arguments under the FVRA after finding that making decisions on rehearing requests is a delegable duty. Chief Justice Moore wrote that the FVRA statute codified at 5 USC 3348(a)(2) includes a narrow definition of “duties and functions” that must be performed by a constitutionally appointed officer. Although the legislative history of the FVRA indicated competing considerations in passing the bill, including the view of some lawmakers that “[t]The bill applies to all vacancies in Senate-confirmed positions in executive agencies,” the plain language of the law stated that the only offices or functions that are void absent an appointed officer by the Constitution are the functions “which the law requires to be exercised by the competent authority”. officer.” Although the Federal Circuit has acknowledged that this interpretation renders Section 3348(a)(2) “infinitely small,” Arthrex’s position would call into question the issuance of 668,000 U.S. patents over the past decade that were signed by a junior officer replacing the director.

Requests for rehearing may be delegated, PTAB decision is supported by substantial evidence

Interpretation Arthrex I, the Federal Circuit found that reviewing the Director’s rehearing requests was a delegable duty. While the Supreme Court of Arthrex I referred for review by the Director or Acting Director of the USPTO, the Court cautioned that “the Director does not need to review every decision of the PTAB. What matters is that the director has the discretion to review the decisions made by the DPAs. The Director’s general delegation authority under Section 3 of Title 35 of the United States Code has not been circumscribed by any statute identified by Arthrex to support the argument that rehearing requests cannot be delegated. Although Arthrex argued that 5 USC § 3347(b) indicated that the director’s general delegation authority could not satisfy the FVRA, the Federal Circuit held that this law applied only to executive agencies. , which by definition under 5 USC § 105 are limited to executive agencies, Crown corporations, or independent institutions, not the USPTO.

The Federal Circuit also rejected Arthrex’s argument that the Commissioner of Patents’ denial of its request for a rehearing violated the separation of powers imposed by the US Constitution under the Take Care Clause. As Arthrex argued, Section 3(b)(2)(C) of Title 35 of the U.S. Code provides that the Commissioner of Patents is only removable “for misconduct or unsatisfactory performance”, which in no way limits doubts the president’s ability to remove the commissioner. “Although the president must have a reason to remove the commissioner from this position, he needs no reason to remove the commissioner from his role as the temporary replacement for the director,” Chief Justice Moore wrote.

Turning to the merits of the PTAB’s underlying decision invalidating Arthrex’s patent claims, the Federal Circuit found that the PTAB’s decision was supported by substantial evidence. While Arthrex argued that the effective filing date of its contested patent claims took precedence over publication of the claimed prior art reference, an interim Arthrex patent application derived from its parent patent application lacked written description of the flexible eyelet claimed by the patent in suit. Arthrex also challenged the PTAB’s analysis of the written description requirement under 35 USC § 112 in inter partes Review Proceedings (DPI), which by law are limited to the grounds of novelty of Section 102 and obviousness of Section 103. However, although 35 USC § 311(b) limits the grounds of invalidity which may be raised in IPR claims, the Federal Circuit found that the statute did not limit the grounds the PTAB could consider in resolving Section 102 or 103 arguments. Thus, the Federal Circuit found that Arthrex had not identified any reversible error in the PTAB’s decision that Arthrex’s patent claims were anticipated by the state of the art, invalidating those claims under Section 102.

Image Source: Depot Photos
Image ID: 103763568
Copyright: sydney

Photo by Steve Brachman

Previous Central Bank of Sri Lanka $4 billion in debt by March 2022
Next Immuneering Co. (NASDAQ:IMRX) Brief Interest Update