Case No. 19-1434 | Fed. Cir.
March 1, 2021
Preview by Josh Carrigan, Associate
The Federal Circuit’s Halloween decision in Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019), sent shockwaves through the patent law community and plunged the status of more than 250 Administrative Patent Judges (“APJs”) into a cloud of uncertainty. Since the advent of the Leahy-Smith America Invents Act (“AIA”), APJs have adjudicated litigation-like disputes between private parties, making binding determinations about the patentability of disputed claims. In Arthrex, the Federal Circuit held that APJs are unconstitutionally appointed principal officers and remedied the defect by severing Title 5 civil service tenure protection, thereby making APJs removable at will by the Director of the United States Patent and Trademark Office (USPTO).
The Constitution provides only four valid methods to appoint “Officers of the United States.” Officers may be appointed by the President “by and with the Advice and Consent of the Senate,” by the “President alone,” the courts, or “the Heads of Departments.” U.S. Const. art. II § 2 cl. 2. The latter three methods are permissible only in the case of “inferior Officers.” Id. With no constitutionally provided line dividing so-called principal officers—those who must be appointed by the President and confirmed by the Senate—and inferior officers, the distinction has been the source of much litigation, often in the context of a challenge to an allegedly unconstitutionally appointed officer’s actions. Under current Supreme Court precedent, an inferior officer is one “whose work is directed and supervised at some level by” principal officers. What remains unclear, and at the heart of the Arthrex controversy, is the extent of supervision which renders an officer inferior.
Relying on Edmond, the Federal Circuit distilled at least three factors critical to determining whether an officer is principal or inferior: whether an appointed official has (1) the authority to remove the officer in question, (2) the authority to review or reverse another officer’s decisions, and (3) supervisory oversight over the officer. See id. at 664–66. The Federal Circuit found that two of these factors—authority to remove and authority to review or reverse—weighed in favor of finding that APJs are principal officers, while only one—supervisory oversight—weighed in the other direction, and the court held that the APJs were unconstitutionally appointed principal officers. See Arthrex, 941 F.3d at 1335. To remedy the defect, the court tipped one factor—removal authority—back toward a finding that APJs are inferior by invalidating the APJs’ statutory removal protections to make them removable at will by the Director. See id. at 1338.
None of the parties to the Federal Circuit proceedings came away happy: all three—Arthrex, Smith & Nephew, and the United States as intervenor—petitioned for certiorari. The Supreme Court accepted, agreeing to review two issues: whether APJs are principal officers (merits), and if so, whether the Federal Circuit’s remedy cured the constitutional defect (remedy).
On the merits, the controversy is squarely centered on the test for determining whether an officer is principal or inferior. The United States and Smith & Nephew argue that the Federal Circuit’s “checklist approach” to its Edmond application gave undue weight to certain mechanisms for control (or the absence thereof). Brief for the United States at 15, United States v. Arthrex, Inc., Nos. 19-1434, 19-452, & 19-1458 (U.S. Nov. 25, 2020). Arthrex largely agrees with the Federal Circuit’s result on the merits but goes further, urging the Court to hold that review authority is essential for agency adjudicators to be inferior. See Brief for Arthrex, Inc. at 19–20, United States v. Arthrex, Inc., Nos. 19-1434, 19-452, & 19-1458 (U.S. filed Dec. 23, 2020).
As for remedy, the United States and Smith & Nephew argue that the Court need not reach the issue, but Arthrex argues primarily that the Federal Circuit’s remedy does not cure the defect . See Brief for Arthrex, Inc. at 45–47. Implicit in Arthrex’s argument against severance of tenure protection is the proposition that the remedy here lies with Congress, not the courts. In a forthcoming Essay to be published in The George Washington Law Review Arguendo, I explore this idea in greater depth, arguing that no matter how the Court decides on the merits, the only path to harmonizing patent adjudication at the USPTO with the countless other agency adjudication regimes is through an act of Congress.
It may well be that the Court answers a burning question in administrative law when it decides Arthrex, further defining the contours of the line between principal and inferior officer. This is particularly important in the realm of agency adjudication, not just at the USPTO, but in the many other agencies where such adjudications occur. A balance must be struck between the need for impartial adjudicators and political accountability. Whatever answer the Court gives, it remains to be seen whether anyone will come away happy from this case; perhaps the parties would fare better with an appeal to Congress.