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Fate of Administrative Patent Judges Hangs in the Balance of Upcoming Federal Circuit Case

Reports Patent

On April 1, 2019, the United States filed a brief as an appellee-intervenor in the upcoming Federal Circuit case Polaris Innovations Ltd. v. Kingston Technology Co., No. 18-1831 (Fed. Cir. 2019). Polaris had appealed to the Federal Circuit from an adverse decision of the Patent Trial and Appeal Board (“Board”) in an inter partes review proceeding. In its appeal, Polaris contends that administrative patent judges of the board are not “inferior” officers of the United States under the Appointments Clause, U.S. Const. art. II, § 2, cl. 2, and as a result, Congress impermissibly vested their appointments in a department head (The Secretary of Commerce), instead of the proper appointment procedure for a “principal” officer—being nominated by the President and confirmed by the Senate. For context, once administrative patent judges are appointed to their position by the Secretary of Commerce, they are subsequently appointed by the Director of the United States Patent and Trademark Office (“USPTO”) to panels comprising of “at least three members.” See 35 U.S.C. § 6(c). The Board panels review appeals from adverse decisions on patent applications as well as those from the rejection of claims in patent reexaminations, and conduct derivation proceedings, inter partes reviews, and post-grant reviews. See 35 U.S.C. § 6(b); id. at §§ 311-319.

The Federal Circuit certified Polaris’s constitutional challenge to the Attorney General under Federal Rule of Appellate Procedure 44(a), asking the Attorney General to inform the Court whether the United States intended to intervene. On September 4, 2018, the United States filed a notice of intervention.

The United States’ argument is two-fold, asserting that (1) Polaris forfeited its Appointments Clause challenge by failing to raise it at any point in Board proceedings, and (2) the United States Patent and Trademark Office’s (“USPTO”) administrative patent judges are inferior officers whose appointment Congress was free to vest in the Secretary of Commerce, a department head.

As to the first point, the U.S. contends that the Federal Circuit has already held that it will consider an Appointments Clause challenge to the statutory method of administrative patent judges’ appointment raised for the first time on appeal only in “exceptional cases,” In re DBC, 545 F.3d 1373, 1389–80 (Fed. Cir. 2008), and Polaris fails to even argue that the instant action is an exceptional case. The United States therefore urges the court to decline to reach the Appointments Clause challenge since the issue “could have been raised” with the USPTO board beforehand. Id.

More interestingly, the U.S. argues that the USPTO administrative judges are indeed inferior officers of the federal government. The U.S. concedes that the Supreme Court has never established exclusive criteria for distinguishing between principal and inferior officers; however, the Court has explained that “‘inferior officers’ are officers whose work is directed and supervised at some level by others who were appointed by Presidential nomination with the ‘advice and consent of the Senate.’” Edmond v. United States, 520 U.S. 651, 661–63 (1997). Accordingly, the Federal Government asserts that administrative patent judges are inferior officers since their work is directed and supervised by the Director of the USPTO and the Secretary of Commerce, both of which are Presidentially-nominated and Senate-confirmed officials. More specifically, the U.S. argues that past decisions have emphasized that the ability to remove an official is a powerful method of control and supervision. See Id. at 664; see also Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 510 (2010). The government contends that administrative patent judges are therefore inferior officers since they are subject to two forms of removal. First, the Director of the USPTO can remove judges from any adjudicative panels; Second, the Secretary of Commerce has the ability to terminate judges’ employment subject only to the civil-service tenure protections afforded to most federal employees—a standard far lower than “good cause” removal restriction the Federal Circuit has previously found to be consistent with inferior officer statutes. See Masias v. Secretary of Health & Human Servs., 634 F.3d 1283, 1294 (Fed. Cir. 2011). Additionally, the U.S. asserts that the administrative patent judges are supervised by the Director of the USPTO since he can “issue regulations governing the conduct of the Board’s proceedings; issue binding policy directions regarding the relevant laws and how they apply to various factual situations, which may be issued in connection with pending cases and which the judges are required to apply; and designate himself as a member of the panel that decides whether to rehear—consistent with his policy direction—any aspect of any Board decision.” Brief for Appellee-Intervenor United States at 8, Polaris Innovations Ltd. v. Kingston Technology Co., No. 18-1831 (Fed. Cir. 2019).

This case comes at a time when the Appointments clause has once again received increased attention due to the Supreme Court’s decision in Lucia v. SEC, 138 S.Ct. 2044 (2018), which held the Securities and Exchange Commission’s (“SEC”) administrative law judges are principal officers of the United States. What makes Lucia especially noteworthy is the Court’s reasoning: that the SEC’s administrative law judges are “near-carbon copies,” id. at 2052, of the tax-court judges which the Court previously held to be principal officers in Freytag v. Commissioner, 501 U.S. 868 (1991). Hence, Freytag and Lucia could potentially be extended to all of the 30-plus federal agencies that employ administrative law judges, many of which look strikingly similar to one another. While the doctrine on the Appointments Clause is undoubtedly nebulous, there is certainly reason to think this case may be on the fast track to the Supreme Court’s docket given the Lucia decision last term and its implications. How this plays out will determine whether the judiciary will further chip away at administrative agencies’ independence and autonomy.