Inter Partes Review (IPR) proceedings have survived the latest attack to their existence. While advocates of patent rights had hoped that the entire IPR regime would be eliminated as unconstitutional, patent owners will have to contend with IPR proceedings for the foreseeable future. Indeed, as the Supreme Court has again underscored the viability of the IPR system, it can be argued that this popular proceeding to challenge patentability of issued patents is as strong as ever.
More specifically, the Supreme Court agreed with the Federal Circuit’s decision in Arthrex v. Smith & Nephew that the Administrative Patent Judges (APJs) of the Patent Trial and Appeal Board (PTAB) were principal officers. As such, the provision of the statute implementing IPRs that allowed APJs to have unsupervised power to adjudicate IPR proceedings is unconstitutional.
The Supreme Court diverged from the Federal Circuit, however, in resolving the constitutional issue, deciding that the most targeted solution to the constitutional problem is to hold that the IPR statute was “unenforceable as applied to the Director insofar as it prevents the Director from reviewing the decisions of the PTAB on his own. The Director may engage in such review and reach his own decision.”
In short, therefore, IPR proceedings are not, on the whole, unconstitutional; instead, past and future decisions are valid, with the Director having final authority in adjudicating petitions for IPR.
Diving in further, the key issue at play in Arthrex was whether the APJs of the PTAB were principal officers — whose appointment required the advice and consent of the Senate — or inferior officers who could be appointed by the Secretary of Commerce, as had happened since the formation of the PTAB.
In the underlying decision, the Federal Circuit found that APJs were, in fact, principal officers. To fix this constitutional violation, the Federal Circuit invalidated the tenure protections of APJs. By making those judges removable-at-will by the Secretary of Commerce, the Federal Circuit held that it had rendered the APJs inferior, rather than principal, officers.
The Supreme Court’s decision (written by Roberts and joined, relative to Parts I and II, by Alito, Gorsuch, Kavanaugh, and Barrett) agreed that APJs are principal officers. In short, Roberts wrote, that APJs “exercise power that conflicts with the design of the Appointments Clause to preserve political accountability.”
Justice Roberts, in Part III, next turned to the manner in which this problem with the statute implementing IPR proceedings should be resolved. For those keeping score at home, only four justices signed onto Justice Roberts’ opinion in Part III. For this section, Justice Gorsuch dropped from the majority, filing a dissenting opinion of his own in which he concurred in part, and dissented in part. In addition, Justice Breyer wrote an opinion concurring in the judgment, of Part III only, in part and dissenting in part; an opinion to which Justices Sotomayor and Kagan joined. Justice Thomas dissented in the entire opinion. Justices Breyer, Sotomayor, and Kagan joined Justice Thomas’ dissent to Parts I and II.
With the scoreboard settled, we now turn to Justice Roberts’ solution to the constitutional issue with the statute implementing IPRs. To start, Justice Roberts noted that the Supreme Court’s principal that where a case “presents a conflict between the Constitution and a statute, we give full effect to the Constitution and to whatever portions of the statute are not repugnant to the Constitution, effectively severing the unconstitutional portion of the statute.”
For its part, Arthrex argued that the entire regime of IPR should be rendered unconstitutional, an opinion shared by dissenting Justice Gorsuch. The majority, however, disagreed. Instead, finding that “a tailored approach is the appropriate one: Section 6(c) cannot constitutionally be enforced to the extent that its requirements prevent the Director from reviewing final decisions rendered by APJs.” In diverging from the Federal Circuit’s remedy of making APJs removable-at-will, the Court found that “review by the Director better reflects the structure of supervision within the PTO and the nature of APJs’ duties.”
IPR proceedings, having been spared by the Supreme Court in the latest constitutional attack against them, seem as strong as ever and poised to continue as a popular proceeding to challenge the validity of an issued patent.