On March 1, 2021, the Supreme Court heard oral argument on the question of when a government official exercises enough independent power and judgment to require that such a person be confirmed by the Senate before taking office. The case—U.S. v. Arthrex—arises from the relatively obscure corner of patent law but has implications far beyond the world of patents.
Since the beginning of the Republic, Congress has authorized the executive branch to grant patents to inventors of “new and useful” inventions. That power has always been exercised by high ranking government officials, all of whom the President appointed and the Senate confirmed. Indeed, three Cabinet officials—the Secretary of State, Secretary of War, and the Attorney General—examined and ultimately granted the first patent applications. Over the next two centuries, the patent system matured, and the Department of Commerce created the Patent and Trademark Office (PTO) to examine patent applications. With time, the scope of the PTO’s authority expanded. Nonetheless, throughout this time, patents were issued by a Senate-confirmed official. Even when Congress, in 1981, first created a mechanism for the PTO to reexamine (and potentially cancel) previously issued patents, the power to do so continued to reside in the Senate-confirmed head of the PTO.
In 2014, Congress passed the America Invents Act, which significantly reworked the American patent system. As relevant here, Congress created the Patent Trial and Appeal Board (PTAB), an administrative law body housed within the PTO and vested with the power to cancel patents. This Board is staffed by the Administrative Patent Judges (APJs) who are appointed by the Secretary of Commerce (rather than the President) and are not subject to Senate confirmation. Furthermore, like other Administrative Law Judges, APJs have certain employment protections and can be terminated only for cause.
In 2018, the Supreme Court rejected one constitutional challenge to the newly created administrative patent cancellation proceedings. It explained that the cancellation of patents “involves the same basic matter as the grant of a patent.” In so doing, the Court teed up the question presently before it—whether patent cancellation, like patent issuance, must be done only by “principal Officers” of the United States, and if so, whether the individuals staffing the PTAB are such officers. Alternatively, if the APJs who staff the PTAB are not principal officers themselves, is the amount of supervision and control exercised by the Secretary of Commerce and the Director of the PTO over the APJs sufficient to render them “inferior officers”? If such control is sufficient, then the constitutional problem would vanish because the PTAB decisions would be, in a legal sense, decisions of the properly appointed and confirmed principal officer—the Director of the PTO.
II. The Lower Court’s Decision
This case began when two companies (Smith & Nephew, Inc., and Arthorcare Corp.) challenged, before the PTAB, Arthrex’s patent, which is directed to a knotless suture securing assembly. The PTAB held several of the challenged claims to be invalid on the ground that they did not disclose a new invention, or in the language of patent law, were “anticipated.” Arthrex appealed, challenging both the PTAB’s findings and its jurisdiction over the matter. According to Arthrex, because PTAB has the final say on whether to cancel a previously issued patent, the individuals who make that decision are principal officers of the United States and must be appointed by the President and confirmed by the Senate. Because APJs who staff the PTAB are not appointed by the President and confirmed by the Senate, according to Arthrex, the structure of the PTAB violates the Constitution. As a remedy, Arthrex asked the Federal Circuit—the court with exclusive appellate jurisdiction over patent cases—to strike down the portion of the statute that authorizes administrative review and cancellation of patents in its entirety.
The patent challengers (and the Department of Justice, which intervened to defend the constitutionality of the statute) argued that Arthrex’s view of the authority given to APJs is incorrect and that they are inferior officers rather than principal ones. They pointed to several features of post-issuance review that, in their view, showed that the APJs are subject to sufficient control by the Director of the PTO and the Secretary of Commerce. The statute’s defenders conceded that the final decision on patent cancellation is made by the APJs who are not terminable at will. Nonetheless, they argued that because the Director of the PTO 1) promulgates general rules governing post-issuance review; 2) can choose which APJs serve on which panel (this includes the ability to, at any point, add as many APJs to any panel to secure the desired result and punish wayward APJs by declining to assign them to any panel at all); and 3) is himself an ex officio member of the PTAB, he exercises sufficient control over APJs to render them inferior officers.
The Federal Circuit did not find the pro-statute arguments convincing. Instead, it held that whatever general powers of supervision the PTO Director may exercise over the post-issuance review processes, he lacks the authority to “single-handedly review, nullify or reverse a final written decision issued by a panel of APJs.” This lack of ability to review a decision rendered by a panel of APJs, in the Federal Circuit’s view, sets the PTAB apart from military courts of criminal appeal, the structure of which was approved by the Supreme Court in Edmond v. United States. In Edmond, the judges of the military courts were not appointed by the President and confirmed by the Senate, but their decisions were subject to review by a higher court within the executive branch whose judges were properly appointed principal officers. This additional level of review made all the difference to the Federal Circuit.
Yet when it came to the question of remedy, the Court of Appeals did something curious. Instead of invalidating the statute that vested significant power in inferior officers, the Federal Circuit only invalidated the portion of it that offered APJs protections from termination. Under the statute thus revised, the post-issuance review process has not changed at all (i.e., neither the Director nor any other principal officer can review and countermand a PTAB decision), but the deciders can now be terminated at will. This solution is curious for two reasons. First, it doesn’t address the major issue that swayed the Federal Circuit to conclude that APJs are principal officers in the first place: that their decisions are unreviewable. As the statute’s defenders pointed out, even before the Federal Circuit’s decision, APJs could be “punished” for their wayward decisions, including by reassignment to non-adjudicatory roles within the PTO. That, however, was insufficient for the Court of Appeals to conclude that APJs are inferior officers. It is unclear why expanding the Director’s punitive powers to include termination helps address the Federal Circuit’s main concern—the unreviewability of PTAB’s decisions. Second, while the Supreme Court has been clear that an inferior officer must be terminable at will, that fact alone cannot be conclusive. After all, the vast majority of principal officers, e.g., Cabinet Secretaries, Ambassadors, U.S. Attorneys, and others, serve at the pleasure of the President. But the fact that they enjoy no protections from termination does not convert them to inferior officers.
Given the oddity of the Federal Circuit’s decision, the Supreme Court granted certiorari on both questions—whether APJs are indeed “principal Officers,” and if so, whether the Federal Circuit’s remedy is adequate to address the constitutional violation.
III. The Structural Constitution’s Requirements
Ultimately, this case is about political responsibility and the chain of command. Over the last decade, patent law questions and the Patent Office’s attitude towards patent validity have become a veritable political hot potato. President Obama’s PTO Director, Michelle K. Lee, was strenuously criticized for allowing the PTAB to become a patent “death squad.” In contrast, President Trump’s Director, Andrei Iancu, was criticized from the opposite direction for being too friendly to “bad patents.” The problem is that both Director Lee and Director Iancu (as well as the political actors responsible for their selection and confirmation) could hide behind the PTAB and plausibly claim that they are merely carrying out “unbiased” decisions of career officials. But therein lies the problem. These career officials—APJs—sit in judgment of and can overrule a decision made by a Senate-confirmed principal officer. Patents are issued and signed by the Director of the PTO. True enough, the Director doesn’t personally review each and every patent application, but ultimately he has such a power and can order a patent examiner (or even an appellate Board that hears appeals from patent examiners’ decisions) to issue a patent. The Director signs all patents, and he is the one that causes the seal of the PTO to be affixed. (As a side note, it is the affixing of the seal that makes the document “letters patent.”) Yet the PTAB can reverse this decision entirely on its own and without the Director’s consent. Even if a Director disagrees with the PTAB’s decision and wishes it to be reheard by another panel (of which he can be a member), at the end of the day, the Director is only one vote on a panel that, by statute, must be composed of at least three individuals.
This setup creates an odd situation where inferior officers, who after all are inferior because there is someone superior to them, can overrule the decisions of principal officers. It also allows the principal officers to escape any sort of accountability. If they are criticized for issuing too many frivolous patents, they can point to PTAB as a “backstop” and argue that no harm has come to anyone. Conversely, if they are criticized for cancelling too many meritorious patents, they again can point to the PTAB as the culprit. This setup is also inconsistent with the Supreme Court’s understanding of the post-issuance review regime. The Court blessed administrative (rather than judicial) patent cancellation on the theory that cancellation of patents “involves the same basic matter as the grant of a patent.” But if so, it cannot be that a patent can be granted only by a principal officer, while a cancellation can be accomplished by someone placed lower in the constitutional hierarchy.
This case presents a real opportunity for the Supreme Court to clarify the line between “principal” and “inferior” officers. Until now, the inquiry has involved multiple factors such as “level of supervision,” “ability to countermand decisions,” “protection from adverse actions,” and other similar factors. However, as Professor Gary Lawson persuasively argued, at the end of the day, the only important question is “whether the officer’s decisions are subject to review and revision by a higher authority.” In contrast, “[t]he power to remove an officer is a functional, not a formal, power of control, as long as the removal of the officer does not automatically annul the officer’s decisions.”
This approach is most consistent with the structural Constitution because a citizen coming into contact with the government will know whom to blame (or praise) for a decision in his particular case. Though a citizen may take some satisfaction in knowing that a person who rendered a “wrong” decision in his case was later fired, that citizen is still stuck with an unfavorable decision that is not appealable to any higher authority within the executive branch. Our Constitution was designed to not permit political actors from escaping responsibility for decisions rendered “on behalf of the United States.” Therefore, it follows that any officer who makes a final unreviewable decision that speaks for and binds the federal government must be a principal officer appointed by the President and confirmed by the Senate.
For this reason, the Federal Circuit’s remedy makes little sense. Though it provides the Director with more control over wayward APJs than previously exercised, it does not make PTAB’s decisions reviewable by any higher authority. That is insufficient. But there is another reason the remedy is problematic. The Federal Circuit’s solution allows political actors to exert—through the threat of termination—pressure on individuals who are charged with adjudicating patentees’ private property rights. In creating the PTAB, Congress consciously chose to repose the power to cancel vested property rights in a neutral body not subject to political pressures. Doing otherwise may have raised serious due process concerns as, at least in some cases, the federal government itself would have an interest in having a patent cancelled. It was important to Congress to ensure that patent cancellations occur not in response to political pressure, but as a result of neutral application of law to facts. Allowing the Director to fire APJs who fail to uphold or invalidate a patent as per Director’s wishes would destroy the due process protections that Congress so carefully wrote into the statute. Indeed, such protections are a hallmark of administrative adjudications. For example, “principal Officers” like the Social Security Commissioner—as well as commissioners of the SEC, International Trade Commission, FTC, Consumer Product Safety Commission, Merit Systems Protection Board, etc.—all of whom have adjudicative powers, once appointed by the President and confirmed by the Senate, enjoy protection from at-will termination. This protection ensures that pure political concerns do not taint these adjudicators’ decisions and also permits the public to hold elected officials responsible for appointing individuals that the public disapproves of. The Federal Circuit’s remedy undermines both of these goals.
Arthrex presents the Supreme Court with a golden opportunity to clarify a murky area of the law and draw an easily discernible line between principal and inferior officers of the United States. The Court should hold that the sine que non of being an inferior officer is having someone higher up in the federal hierarchy with the ability to review the inferior officer’s decisions in any given case. If the Court takes that approach, it will not only strengthen the American patent system, but it will also strengthen the structural Constitution as a whole and ensure that the liberty protections that are inherent in the constitutional design remain robust for the next generation.