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USPTO Provides Guidance on Director Authority to Rehear IPR Patentability DecisionsJuly 1, 2021
On June 21, 2021, the Supreme Court handed down its decision in United States v. Arthrex. The case addressed whether the Administrative Patent Judges (APJs), who are appointed by the Secretary of Commerce, act as “principal officers” who must be appointed by the President with the advice and consent of the Senate. The Court held that the judges are “inferior officers” so long as the Director of the USPTO, who is a principal officer, nominated by the President and confirmed by the Senate, has the authority to review and rehear the PTAB’s decisions. On June 29, the USPTO provided an interim procedure for how the Director will exercise this authority.
Arthrex sued Smith & Nephew for patent infringement, and Smith & Nephew challenged the validity of the asserted patent in an inter partes review (IPR) in the USPTO. Arthrex appealed the PTAB’s final decision of unpatentability to the Federal Circuit, arguing that the panel of APJs acted as unconstitutionally appointed principal officers because their decisions are not reviewable by a properly appointed principal officer. The Federal Circuit agreed and held that the remedy was to remove the judges’ civil service protections to make them removable at will, thereby rendering them inferior officers. The Supreme Court granted certiorari to consider this issue.
In a fractured decision, a majority of five Justices held that the current system violates the Constitution because no properly appointed principal officer directs and supervises the APJs when it comes to their decisions on patentability. Specifically, 35 U.S.C. §6 limits the Director’s ability to review their decisions by giving only the PTAB the authority to grant rehearing of a final decision.
A different majority of seven Justices determined that 35 U.S.C. §6 cannot be constitutionally enforced to prevent the Director from reviewing the PTAB’s decisions on his own. The Court clarified that “the Director need not review every decision of the PTAB. What matters is that the Director have the discretion to review decisions rendered by APJs.” By resolving the unconstitutional restriction on the Director’s ability to direct and supervise the PTAB, the Justices left the current statutory scheme otherwise intact. This resolves the Constitutional violation because a principal officer now “supervises” the APJs.
Consistent with the Court’s decision, the USPTO has provided an interim procedure for Director review of IPR and PGR final decisions. The Director may sua sponte, or, at the request of a party, rehear a decision. A party request must be submitted, by entering a Request for Rehearing by the Director into PTAB E2E and, similar to the Precedential Opinion Panel (POP) process, submitting a notification of the Request for Rehearing by the Director to the Office by email. Such rehearing requests will not be considered by the original panel unless a panel rehearing is made in the alternative. Such rehearing requests must be made within the period for rehearing to be considered timely, although the deadline may be waived for cases already past the rehearing deadline but not yet on appeal.
The PTAB will continue to issue final written decisions on patentability, however, the Director of the USPTO will now be able to consider rehearing requests and grant rehearing on his own authority. The interim process for requesting such review is similar to the POP process, except requests for original panel rehearing, in the alternative, must be made explicit. As with POP requests, it will take time for the Director to consider individual requests and those that implicate important legal or procedural issues are more likely to be granted rehearing than those that implicate case-specific fact issues. Given the practical constraints on the Director’s time, parties interested in Director rehearing should consider asking for a panel rehearing in the alternative to ensure that the request for rehearing is considered even if the Director denies the request in the first instance. But parties should recognize that this will add to the time for rehearing. Accordingly, parties seeking both a Director rehearing and panel rehearing in the alternative should weigh the likelihood of such a request being granted against the potential that filing a request will further delay their ability to appeal the decision to the Federal Circuit.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Tim Fink, an O'Melveny partner licensed to practice law in the District of Columbia, and Amy K. Liang, an O'Melveny counsel licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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