United States v. Arthrex, Inc.

No. 19-1434 - Argued March 1, 2021
At Issue

1. Are administrative patent judges principal officers who must be appointed by the President with the advice and consent of the Senate, or inferior officers who may be appointed by a department head?
2. If they are principal officers, can they be rendered inferior officers by severing the portion of the Patent Act restricting their removal?

  • Malcolm L. Stewart, for Petitioner the United States
  • Mark A. Perry, for Respondents Smith & Nephew, Inc., et al.
  • Jeffrey A. Lamken, for Respondents Arthrex, Inc.
Background and Case Commentary

The Patent Trial and Appeal Board consists of a Director, a Deputy Director, a Commissioner for Patents, a Commissioner for Trademarks, and approximately 250 administrative patent judges. Under 35 U.S.C. § 6(a), the Secretary of Commerce, in consultation with the Director of the U.S. Patent and Trademark Office (USPTO), appoints Administrative Patent Judges (APJs) to the Board. Among other responsibilities, APJs decide questions of patentability in inter partes review, a “hybrid proceeding” with “adjudicatory characteristics similar to court proceedings.”

Arthrex owns a patent that was subject to inter partes review, and a three-judge panel consisting of three APJs issued a final written decision finding the claims unpatentable. Arthrex appealed to the U.S. Circuit Court for the Federal Circuit, claiming that the appointment of APJs violates the Appointments Clause of the U.S. Constitution. The Federal Circuit agreed, finding that the statute as currently constructed makes APJs principal officers, who must be appointed by the President with the advice and consent of the Senate. The Federal Circuit stated that as a remedy it would sever the provision that restricts removal of APJs. It reasoned that by doing so, it rendered APJs inferior officers and eliminated the constitutional appointment problem.

Alan Morrison:

On the merits of the inferior officer question in United States v. Arthrex, Inc., there are two subsidiary questions: are Administrative Patent Judges (APJs)—whose status is at issue—inferior officers, and by what test will that be determined?  Because the second question should be answered first, I focus on that issue.

Malcolm Stewart for the United States and Mark Perry for the private party argued in favor of inferior officer status for APJs, relying on the Court’s decision in Edmond v. United States. That opinion cited to a number of facts that led the Edmond Court to conclude that Coast Guard Judges were inferior officers.  At least three Justices seemed troubled by the open-ended nature of that approach as applied to APJs:

JUSTICE SOTOMAYOR (of Stewart): For my colleagues — and there are some who don’t like amorphous concepts or ones that don’t have a yardstick by which to measure — what is the advantage of us keeping the Edmond test?

JUSTICE THOMAS (of Perry): What would be your test for whether someone is an inferior officer? It seems to be almost a totality of the circumstances.

JUSTICE ALITO (of Perry):  In your brief you tick off all the ways in which there is control over these APJs. So I’m going to go through these, go through your list and eliminate them one by one, and you tell me when to stop, when we get to the point where we’ve crossed the line and there’s no longer sufficient control [for the person to still be an inferior officer].

Below, I provide an answer that addresses the running theme in these three questions.

United States v. Arthrex, Inc. on Oyez: https://www.oyez.org/cases/2020/19-1434

Key Questions from Oral Argument

Justice Thomas to Respondents (26:12): What would be your test for whether someone is an inferior officer? It seems to be almost a totality of the circumstances.

Alan Morrison: Your Honor, we think that courts should primarily defer to Congress’s determination about whether officers are inferior officers. When Congress authorized the Secretary to appoint APJs, the Senate gave up the power to oversee their appointment that it has for principal officers. In addition, when the President signed the AIA into law, he surrendered his power to appoint APJs. This should create a rebuttable presumption that the APJs are inferior officers.

The test offered by Arthrex’s lawyers is appealing because it appears quite simple and easy to apply: if the person has final decisional authority, he or she must be a principal officer. But as Justice Breyer pointed out, there are a wide range of government persons involved in a variety of adjudications, and making them all officers who must be appointed by a President and confirmed by the Senate is undesirable and impractical. And that approach assumes, contrary to reality, that all final decisions are like those made by APJs—that they have great financial or other significance, and that one size fits all. Therefore, the Arthrex test is too blunt an instrument.

Our “deference to Congress” approach has the advantage of a bright-line test, like Arthrex’s test, because it assumes that Congress’s designation is correct; courts will only override Congress’s decision in egregious circumstances, which are easier to identify than close-call cases such as this one. But our approach also has the advantage of a more holistic approach because it allows Congress to treat appointed officers in different government programs differently.

Picking the right test to decide Arthrex may be more important than whether the Court correctly concludes that APJs are inferior or principal officers—especially with the status of ALJs at Social Security and AJs deciding immigration cases right behind.

Justice Barrett to Respondents (39:55): So I want you to assume for the purposes of my question that you lose on the Appointments Clause issue, and I want to ask you about remedy. So, you know, the federal -- well, think about -- one unusual thing about the remedy here is that it's not one specific provision in this statutory scheme that's being challenged as unconstitutional.

It's the way that they work together. You know, so we could, if we decided that it was unconstitutional, perhaps make all of the APJs subject to -- say they're principal officers, and so they have to be subject to presidential appointment, senatorial confirmation.

We could say, listen, we're going to strike the provision in the statute that says only the PTAB may grant rehearings so that the director has that authority.

We could make them maybe at-will employees, so they're removable at the discretion of the director without having to go through the full process that we discussed before. That's a lot of discretion to give us in trying to shape a remedial -- a remedy here. Why should we even assert the authority to do that, to sever?

John Harrison: Justice Barrett, the question whether the Court may or should sever the statute, in the sense of altering the statute's content to bring it into accord with the Constitution, does not arise. If a court finds that the statutory law before it is unconstitutional, either because a provision is separately unconstitutional or because a combination of rules together is unconstitutional, the court does not face a question of remedy. Courts do not give remedies that change the content of statutory law, any more than they give remedies that cause statutes that previously were invalid to become valid. The Constitution causes unconstitutional rules and combinations of rules to be invalid, and statutes govern their own operation in the contingency of unconstitutionality. Sometimes statutes deal with that contingency explicitly, as with severability clauses, or with an explicit fallback provision as in Bowsher v. Synar. When a court must find an implicit fallback system, it may have to exercise judgment in finding the statute's meaning. But a court making judgments of statutory construction is not exercising the kind of discretion that goes into shaping an injunction, for example.

In this case, the Court might conclude that although none of the statutory rules governing APJs is unconstitutional in isolation, the rules are unconstitutional in combination. A court that concludes that a combination of statutory rules is unconstitutional might infer from the statute's text and structure an implicit fallback system under which the entire combination is inoperative, so that here APJs have no authority to decide cases. Or a court might infer that the fallback eliminates one or more components of the statutory system, so as to produce a system that is constitutional and operative. The court is not exercising more discretion in reaching one of those results rather than the other, because the court is not exercising discretion. In finding the fallback system, the court is identifying statutory content using tools of statutory interpretation. Describing the fallback inquiry as remedial is a figure of speech that must be used with care. The question is not whether the Court should make APJs at-will employees. The question, if the statutes as written are unconstitutional, is whether the statutory fallback system does so. The Court has and needs no authority to sever. It need only identify the law and apply the law to the case.