Client Alert

Do We Already Know the Federal Circuit’s Final Answer in Arthrex?

20 Mar 2020

UPDATE:  As predicted below, the Federal Circuit denied the petitions for rehearing en banc, over several dissents, on March 23.

While the rest of us wait on the Federal Circuit’s decision on the rehearing petitions in Arthrex, Inc. v. Smith & Nephew, Inc., there are signs that the Federal Circuit judges themselves may already have moved on.

In October 2019, a three-judge panel of the Federal Circuit issued a decision in Arthrex holding that the America Invents Act violated the Appointments Clause of the U.S. Constitution. 941 F.3d 1320, 1325. The Act gave the Secretary of Commerce the authority to appoint the Patent Trial and Appeal Board Administrative Patent Judges (APJs) who oversee and decide inter partes reviews. Yet at the same time, the Act granted APJs significant authority—the power to issue final written decisions on behalf of the United States adjudicating property rights. And the Act limited the U.S. Patent and Trademark Office Director’s authority to oversee and review APJs’ decisions or to remove them from office. The Federal Circuit concluded that those circumstances made APJs principal officers who, under the Constitution, must be appointed by the President and confirmed by the Senate. Id. at 1334-35. To remedy the constitutional violation, the Federal Circuit severed the portion of the Patent Act restricting removal of the APJs. Id. at 1337-39. It also limited the reach of its decision to final decisions reached by APJs who were not constitutionally appointed and where parties timely raised an Appointments Clause challenge on appeal—either in their opening appeal brief or by motion before filing the opening brief. Id. at 1339-40.

Much has happened since Arthrex. Multiple judges who were not on the Arthrex panel have authored opinions disagreeing with various aspects of the decision. Polaris Innovations Ltd. v. Kingston Tech. Co., 792 F. App’x 820, 820-31 (Fed. Cir. 2020) (Hughes, J., concurring, joined by Wallach, J.); Bedgear, LLC v. Fredman Bros. Furniture Co., 783 F. App’x 1029, 1030-34 (Fed. Cir. 2019) (Dyk, J., concurring in the judgment, joined by Newman, J.). In December 2019, all parties in Arthrex, including the government, sought rehearing and rehearing en banc. Arthrex, the appellant, challenged the panel’s severability analysis and argued that the constitutional violation remained. The government and the appellees argued that the panel was wrong to find a violation and wrong to adopt the remedy it did. Despite calling for responses in January, the Federal Circuit to date has taken no further action in Arthrex.

Yet the Federal Circuit has acted in related cases, and its action in those cases may suggest that it plans to deny any rehearing in Arthrex. In late February, the Federal Circuit began denying rehearing en banc in cases raising the same Appointments Clause issues decided and still pending on petitions for rehearing in Arthrex. Order, Polaris Innovations Ltd. v. Kingston Tech. Co., 18-1831 (Fed. Cir. March 16, 2020) (ECF 106); Order, Image Processing Techs. v. Samsung Elecs. Co., 18-2156 (Fed. Cir. Feb. 24, 2020) (ECF 75); Order, Image Processing Techs. v. Samsung Elecs. Co., 19-1408 (Fed. Cir. Feb. 24, 2020) (ECF 72). In each of those cases, Federal Circuit panels had vacated and remanded APJ final written decisions based on Arthrex. In each, the government and one or more of the parties petitioned for rehearing en banc, raising the same or similar issues to the issues raised in the en banc petitions in Arthrex. The government also argued that, at the least, the Federal Circuit should hold these related cases pending a final decision in Arthrex. The Federal Circuit unanimously denied all those requests without calling for a response to the petitions and without any further explanation. The Federal Circuit also later denied government motions to stay the mandates while the government seeks writs of certiorari to the U.S. Supreme Court. Order, Image Processing Techs. v. Samsung Elecs. Co., 18-2156 (Fed. Cir. Feb. 24, 2020) (ECF 77); Order, Image Processing Techs. v. Samsung Elecs. Co., 19‑1408 (Fed. Cir. Feb. 24, 2020) (ECF 74).

Should the government or any parties in the recently denied cases seek Supreme Court review, a curious timing anomaly could occur.  Those cases could leapfrog Arthrex while it remains pending in the Federal Circuit on petitions for rehearing.  The “Arthrex issue could become defined by some other case name. Something similar to this happened when the Supreme Court decided the standard of review for district court claim construction decisions. After the Federal Circuit granted rehearing en banc in Lighting Ballast v. Phillips Electronics, but before it issued its en banc decision, a petition for a writ of certiorari was filed in Teva v. Sandoz challenging the Federal Circuit’s standard of review for district court claim construction decisions. And shortly after the Federal Circuit issued its en banc decision in Lighting Ballast in February 2014, the Supreme Court granted review in Teva in March 2014—months before a certiorari petition was due in Lighting Ballast.

Of course, many possibilities might explain the Federal Circuit’s recent rehearing denials, including that the Federal Circuit denied further review for reasons unique to these cases. Yet the growing number of denials across multiple cases point to another possibility—that the Federal Circuit is denying review because a similar denial in Arthrex is forthcoming. The actual order in Arthrex may be delayed simply because one or more judges are authoring opinions concurring in or dissenting from a denial. But given the Federal Circuit’s apparent interest in limiting the effects of Arthrex and its desire for timely action in affected cases, these relatively rapid denials may signal that the U.S. Supreme Court is now the only possibility for further review on this Appointments Clause issue.

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