Arthrex applies to: “All agency actions rendered by those [unconstitutionally appointed] APJs”

Virnetx Inc. v. Cisco Systems and USPTO (intervenor) (Fed. Cir. 2020)

In Virnetx, the Federal Circuit issued a non-precedential decision remanding and vacating the PTO decision in light of Arthrex (unconstitutionally appointed PTAB judges cannot cancel a patent).  One difference between this case and artrex is that the Virnetx patents were cancelled via pre-AIA inter partes reexamination rather than inter partes review.  The court found the difference meaningless:

Although this appeal arises out of an inter partes reexamination and not an inter partes review as was at issue in Arthrex, we see no material difference in the relevant analysis. We therefore grant VirnetX’s motion.

Slip Op. (Opinion by Judge O’Malley and joined by Judges Moore and Chen). [VirnetxArthrexI].

The PTO immediately filed a petition for panel rehearing and rehearing en banc.  Those petitions have now been denied. However, the original panel has expanded upon its original opinion in with further justification.

The PTO’s particular contention goes as follows: PTAB judges may be acting as principal officers when ruling over AIA trials, but they are not so high-and-mighty when hearing an inter partes reexamination appeal (or presumably an ex parte appeal from a patent applicant). In response, the Federal Circuit explained that an individual’s Appointment status is associated with the whole person and is related to “all of that appointee’s duties.” See Freytag v. Commissioner of Internal Revenue, 501 U.S. 868 (1991).

The court thus concludes:

[I]f these APJs are unconstitutionally appointed principal officers because of their inter partes review duties in light of Arthrex, it would appear that under Freytag vacatur would be appropriate for all agency actions rendered by those APJs regardless of the specific type of review proceeding on appeal.

Rehearing Denial. See also Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019) en banc denied in Arthrex, Inc. v. Smith & Nephew, Inc., 953 F.3d 760 (Fed. Cir. 2020).  Multiple petitions for writ of certiorari are likely coming soon in Arthrex.

Of some interest, the PTO requested that the mandate from that case be delayed, but that motion was denied by the panel. Fed. R. App. P. 41(d)(1).  The PTO had hoped to delay holding remand IPR trials in Arthrex and other similarly situated cases.  In its denial of the stay-of-mandate, the Federal Circuit explained its position:

The delay contemplated by the United States could cause harm. All the cases in this court that are in posture similar to that of Arthrex involve patent claims deemed unpatentable by the Board. The delay contemplated by the United States would cause the continuation of stays in those proceedings and in related proceedings in district courts. Those stays have the effect of leaving the patent claims in force and also could cause the continued obligation to pay fees under license agreements that (as is common) require payment until a final adjudication of invalidity. At the same time, the limited remand proceedings required by the Arthrex decision (in no more than 81 cases) do not seem especially burdensome, given the resources of the Board, which has more than 250 members. . . . We conclude that the public interest under these circumstances favors denying the stay.

ArthrexStayDenial (March 30, 2020) Note here that, the PTAB count is “more than 100 decisions” that have been vacated under Arthrex “and more such Orders are expected.” In a General Order, Chief Administrative Patent Judge Scott Boalick has now ordered “all such cases in administrative abeyance until the Supreme Court acts on a petition for certiorari or the time for filing such petitions expires.”  This General Order from the PTAB appears contrary to the spirit of the the above-quoted order from the Federal Circuit. I expect at least one of the 100+ patentees will attempt an emergency appeal of the general suspension of activity by the PTAB.