In United States v Arthrex, the Supreme Court held that 35 U.S.C. §6(c), which sets forth the authority of Patent Trial & Appeal Board (“PTAB”) Administrative Patent Judges (“APJs”), is unconstitutional because APJs effectively wield the power of principal officers (who require Senate confirmation) while being appointed as inferior officers (who do not require Senate confirmation) (see our prior blog here).
The U.S. Patent and Trademark Office has begun charting its path forward for devising and implementing agency rules in response to the U.S. Supreme Court’s decision in United States v. Arthrex.
To resolve the inconsistency, the Supreme Court vested the USPTO Director, who is a principal officer, with authority and discretion to grant rehearing of PTAB Final Written Decisions (FWDs) regarding patentability of challenged patent claims. The Supreme Court held, “What matters is that the Director have the discretion to review decisions rendered by APJs. In this way, the President remains responsible for the exercise of executive power—and through him, the exercise of executive power remains accountable to the people.”
The Biden Administration has not yet appointed a new USPTO Director. In the interim, the Secretary of Commerce appointed Drew Hirshfeld, who had been serving as Commissioner for Patents, as Acting Director. Acting Director Hirshfeld has the powers of the Director for now, but came into the job as an inferior officer (without Senate confirmation). Nevertheless, until the Senate confirms a new Director, Acting Director Hirshfeld will have all of the authority of the Director, including the ability to grant rehearing of FWDs, according to preliminary USPTO guidance.
During a recent Boardside Chat, the USPTO discussed implementation of an interim Director review process. The process includes three paths for invoking the Director’s authority after a Final Written Decision, as was shown in the following slide:
In the top path, the Director reviews a decision sua sponte. In the middle path (“Option 1”), a party may request Director review. In the bottom path (“Option 2”), a party may request a panel rehearing, which can lead to Director review. If a request for rehearing is denied, the Director may only review sua sponte. If a request for rehearing is granted, the losing party may request Director review, or again, the Director may review the rehearing grant sua sponte.
The process provides for three possible outcomes in the event of Director review, as was shown in the following slide:
As shown in the top row, the Director may grant full or partial rehearing. After that proceeding, either party or both parties may appeal to the Court of Appeals for the Federal Circuit. As shown in the middle row, the Director may deny rehearing, after which parties have the same Federal Circuit appeal options. As shown in the bottom row, the Director may remand, either to the original PTAB panel which issued the FWD, or to a new panel, for further proceedings. Once the original or new PTAB panel issues a FWD, the review options from the previous slide are still available.
During the Boardside Chat, the USPTO emphasized that the new process is interim in nature, and may change depending on public input and agency experience with the new process.
One question that arose was whether the Acting Director, who is an inferior officer, could grant rehearing — given that the Supreme Court found it necessary to have review by a principal officer. The PTO’s answer was yes.
Another question concerned the potential for a flood of requests for Director review, given the hundreds of FWDs issued annually. The Director is empowered to delegate responsibilities to subordinates, including in the present situation. That delegation may at least apportion the burden which could result.
Yet another question concerned whether there might be a change in status or responsibilities for the current Precedential Opinion Panel (POP), which decides issues of exceptional importance to the PTAB. Currently, the POP comprises the Director, the Commissioner of Patents, and the Chief Administrative Patent Judge. At present, there will be no change to the POP.
A further question concerned timing. Frequently, the party who challenges a patent at the PTAB is an accused infringer in patent litigation, either in Federal district court or before the International Trade Commission (ITC). The patent challenger usually seeks to stay the patent litigation proceeding pending PTAB review. There is concern that the rehearing process could extend PTAB proceedings enough to make the tribunals unwilling to stay the litigation pending the outcome at the PTAB (plus any Federal Circuit appeals). Presently, ITC cases are never stayed, because of the speed with which they proceed. District courts, however, have different reputations or practices regarding granting of stays. We will have to wait and see whether Director involvement in rehearings extends the calendar enough to affect the district court’s stay calculus.
The Final Process
It is too early to have any sense of what changes there might be to the interim process, but issues of timing and workload may require adjustments to the process before it is adopted as final. We offer the following suggestions:
- Timing: The Director could address all requests for rehearing directly, rather than after they have run their current course through the PTAB. This effectively would eliminate the bottom path in the first slide above. Eliminating that path would accomplish two things. First, it would remove a layer of rehearing review, thereby potentially shortening the overall process. Second, it would take rehearing decisions out of the hands of the body (PTAB panel) that issued the FWD, and would provide a fresh pair of eyes.
- Workload: The Director could delegate authority to a POP-like review panel. This delegation would accomplish several things. First, it would spread out the burden resulting from rehearing decisions. Second, it would assign rehearing decisions to an entity other than the PTAB panel that issued the FWD. Third, it would create a higher review panel, similar to processes at the ITC, where an Administrative Law Judge (ALJ) provides an initial determination (ID), and the full Commission of the ITC then reviews the ID and either affirms it, modifies it, remands it, or reverses it. The POP-like review panel could comprise senior APJs.
The USPTO has taken the first steps toward implementation of a process that will provide for Director review of PTAB decisions as the Arthrex decision requires. Notwithstanding some concerns that the appointed Director’s review will be biased toward particular constituents (because the Director is a political appointee), the USPTO’s quick initial action and thoughtful approach should provide reassurance to patent owners and patent challengers alike.