U.S. v. Arthrex: Is Historical Practice of the USPTO Relevant?

By James Lovsin --

As discussed here, the Justices asked many questions in the oral argument in Arthrex this week on both questions:  (1) whether there was an Appointments Clause defect and (2) if so, whether the Federal Circuit properly cured it.  With respect to the first question, several of the Justices appeared skeptical that administrative patent judges are "inferior officers" as argued by the government and Smith & Nephew.  Instead, the Court may well affirm the Federal Circuit's holding that the appointment of administrative patent judges to the Patent Trial and Appeal Board violated the Appointments Clause.

What was much less clear from the argument, however, was the Justice's views on the second question.  While the Federal Circuit's cure (prospectively severing a portion of the AIA restricting the way APJs can be removed) did not get much attention during the argument, no other approach appeared to have a consensus either.

Interestingly, the issue of historical practice of the USPTO came up during oral argument.  Justice Kagan asked Smith & Nephew's attorney, Mr. Perry, the story behind the scope of administrative patent judge's authority.  Mr. Perry noted interference examiners going back to 1836, which decided interference proceedings and were appointed by the Secretary of Commerce, as part of "the long and proud history of the Patent Office."  Mr. Perry continued:  "[w]e have a patent-specific tradition [that] comes out of the examination process" and "modern APJs are very much in line with a long, long history that, in fact, stretches all the way back to the founding."

Justice Gorsuch followed up and asked Mr. Perry to admit that administrative patent judges are "a rare bird" and "this is an unusual animal in the sense that there isn't final review in the agency head."  Mr. Perry acknowledged "[i]t is unusual, but it is also well and historically founded and . . . until now, unchallenged."

Smith & Nephew's reliance on historical practice appears misplaced.  Over twenty years ago, the Supreme Court rejected history and tradition in Dickinson v. Zurko, 527 U.S. 150 (1999).  There, the Supreme Court held that the Administrative Procedure Act's (APA) substantial evidence review for agency fact finding applied to appellate review of the USPTO's fact finding.  In doing so, the Court disagreed with the Federal Circuit's position that clear error review of USPTO fact finding applied because that was the standard of review used by the Court of Customs and Patent Appeals before the APA was enacted in 1946.  Chief Justice Rehnquist, joined by Justices Kennedy and Ginsburg, dissented and would have deferred to "the unanimous en banc Federal Circuit and the patent bar."

Just as Smith & Nephew noted that the appointment of administrative patent judges was "until now unchallenged," so too was the clear error standard of review for USPTO fact finding for over 50 years before Zurko.  The USPTO argued in Zurko that the APA trumped historical practice.

For similar reasons, Smith & Nephew's reliance on a "patent-specific tradition" appears misplaced.  Since at least eBay Inc. v. Mercexchange LLC, 547 U.S. 388 (2006), the Supreme Court has sought to avoid patent law diverging from other areas of the law.

If the Supreme Court rules administrative patent judges are inferior officers, it will be surprising to see the Court rely on the history of interference examiners and patent-specific tradition. 

Comments

[hardreaders]

I'm not sure I get the argument. In Dickinson (forgive me for just going by your short description—I haven't studied up on the case details), wasn't it less that SCOTUS rejected historical practice and more that it recognized the intervening event of the APA superseded that practice? And if that's right, what is the comparable intervening event in this case?

Cheers!

[skeptical]

See also the 'historical reliance' on Markings - which generated a correction by Congress.

Note in particular, that the ONLY proper remedy WAS the correction by Congress.

[J. Doerre]

The history is all over the place. Until 1975, Board members were appointed by the President with advice and consent.

Very early on, the head of the Office actually was able to review a decision of the Board, under a “system of two appeals within the office, one from the examiner to a board of three examiners-in-chief, and another appeal from this board to the Commissioner of Patents.” In re Wiechert, 370 F.2d 927, 950-951 (C.C.P.A. 1967); see also Act of March 2, 1861, 12 Stat. 246.

Congress eliminated the ability of the then head of the Office, the Commissioner, to review Board of Examiners-in-chief decisions in 1927 by replacing “’the two appeals, to the Board of Examiners-in-chief and from the latter to the Commissioner, … [with] a single appeal, this single appeal being to a Board of Appeals.’” Wiechert, 370 F.2d at 952 (quoting Frederico, Evolution of Patent Office Appeals, 22 J.P.O.S. 838-920 (1940)); see also Act of March 2, 1927, ch. 273, § 3, 44 Stat. 1335.

Although the Board of Appeals included the Commissioner, the Act of 1927 required “that each appeal shall be heard by at least three members of the Board of Appeals,” and made clear that “[t]he Board of Appeals shall have sole power to grant rehearings.” Act of March 2, 1927, ch. 273, § 3, 44 Stat. 1335, 1336. As noted above, these limitations persist to today, see 35 U.S.C. § 6(c).

Indeed, the Supreme Court noted with respect to the previous head of the Office that “[a]s a member of the Board and the official responsible for selecting the membership of its panels, … the Commissioner may be appropriately considered as bound by Board determinations.” Brenner v. Manson, 383 U.S. 519, 523 n.6 (1966).

[hardreaders]

J. Doerre, thanks for this interesting background. In think in many cases the history being all over the place is a common occurrence, so this case is no exception. It just shows the limits of relying on past patterns of practice.

[Nancy J Linck]

It seems to me that comparing interference practice with post-grant practice is not a good comparison, as interference practice impacted relatively few patents (albeit often important ones). Post-grant practice under the AIA is impacting almost all district court cases and thus having a tremendous impact on the patent system. While the intent of the AIA may have been intended to provide an efficient alternative to district court litigation, instead it has added another layer of litigation -- one in which APJs can trump the district court decision -- one by a judge who IS properly appointed under the Appointments Clause. I have not read the S.Ct. transcript but think the great impact the PTAB is having on the system must be a factor.