Deep Dive Episode 167 – Courthouse Steps Oral Argument: United States v. Arthrex Inc.
The U.S. Supreme Court heard oral arguments in United States v. Arthrex Inc. on March 1, 2021. This case is an important one for the office of patent judges; at issue is whether, for purposes of the Appointments Clause, administrative patent judges of the U.S. Patent and Trademark Office are “principal officers,” which require presidential appointment and Senate confirmation, or “inferior officers,” which do not. Also at issue is whether, if they are principal officers, the lower court properly cured any Appointments Clause defects in the current statutory scheme.
Gregory Dolin and Dmitry Karshtedt joined us to review oral arguments, discuss the case, and offer their divergent views on the merits in a discussion moderated by Kristen Osenga.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
Nick Marr: Welcome, everyone, to this Federalist Society virtual event as today, March 1, 2021, we have a “Courthouse Steps Oral Argument Review of United States v. Arthrex.” I’m Nick Marr, Assistant Director of Practice Groups here at The Federalist Society.
As always, please note that expressions of opinion on today’s call are those of our experts.
We’re very pleased to be joined by a great panel today. I’m just going to introduce our moderator, and she’ll take it from there.
We’re pleased to be joined today by Professor Kristen Osenga. She’s an Austin E. Owen Research Scholar and Professor of Law at the University of Richmond School of Law. With that, Kristen, thanks very much for being with us. The floor is yours.
Prof. Kristen Osenga: Great. Thanks, Nick. As Nick said, I’m Kristen Osenga from the University of Richmond School of Law, and I am joined today with two of my friends and colleagues. We have Professor Greg Dolin from the University of Baltimore School of Law, who is also an Associate Justice at the Supreme Court of the Republic of Palau, and Dmitry Karshtedt, who is a Professor of George Washington University School of Law. You can learn more about each of them by clicking the links on the page that you access this webinar from.
This is a Courthouse Steps webinar about the U.S. Supreme Court case of The United States v. Arthrex that was argued this morning, March 1, 2021.
For this webinar, I’m going to briefly lay out the issue in the Arthrex case before turning it over to Greg and Dmitry who will each give you their impressions of how the Supreme Court arguments went this morning, and after that, each of them will provide you their predictions for what the outcome will be and their viewpoints on the case more generally.
We’ll hopefully have some time to turn it over for audience questions in the last ten to 15 minutes.
The Arthrex case is an important one for patent law, but it may have broader implications because it’s really a separation of powers issue.
In 2011, as part of the Leahy-Smith America Invents Act, or the AIA, a board known as the Patent Trial and Appeal Board, which we like to call the PTAB, at least I call it the PTAB, was created as a faster and cheaper alternative to litigation. PTAB, through a couple of post-patent grant procedures, is able to determine whether one or more claims of an issued patent is invalid.
Since 2012, when the PTAB was implemented, it has happily embraced this task, invalidating more than 2,000 issued patents. Some critics have even dubbed the PTAB a “death squad” for this reason.
To be fair, in recent years, under previous Patent Office Director Iancu, the number of institutions and invalidations has gone down. So much so that, in fact, lawsuits have been filed complaining that the Patent Office’s discretionary decisions not to institute post-grant proceedings is problematic. But the political winds have shifted, so who knows what the future will hold for the Patent Office, and we may yet be headed back towards the death squad days of yore.
In any case, while there have been many complaints about the PTAB’s zeal in invalidating patents, and now their lack of zeal, in instituting these challenges, and also concerns about the PTAB’s process, which many say is stacked against the patent owner, those concerns are not at issue in the Arthrex case.
Rather, the issue today is whether the administrative patent judges, or APJs, who comprise the PTAB, are principal officers, thus requiring presidential appointment and Senate confirmation or whether they are inferior officers that can be simply appointed.
If the APJs are principal officers, their appointment by the head of the department, specifically the secretary of commerce, in consultation with the head of the agency, specifically the director of the U.S. Patent and Trademark Office, is unconstitutional.
The patent infringement part of this case is not really relevant except to explain how this case came to the Supreme Court. Arthrex had a patent. It was issued by the United States Patent and Trademark Office. Arthrex sued Smith & Nephew in district court alleging infringement of that patent. Smith & Nephew then filed a petition at the Patent Office seeking to invalidate a number of claims of the patent.
A three-APJ panel of the PTAB issued a decision holding the claims invalid. Arthrex then appealed to the United States Court of Appeals for the Federal Circuit, arguing that the appointment of the APJs to the PTAB violated the Appointments Clause, or Clause 2 of Article II, Section 2 of the Constitution. This provision requires principal officers to be appointed by the president and confirmed by the Senate while the appointment of inferior officers can be delegated to, as relevant in this case, department heads without Senate confirmation.
Arthrex argued that the PTAB judges are principal officers, and the Federal Circuit agreed. The precedent that the Federal Circuit applied considers the extent of the decisional authority of the officer in their role as well as the amount of supervision and control over the officer in question by an officer that was him or herself presidentially nominated and Senate confirmed.
Cancelling issued patents provides APJs a significant amount of decisional power in their role, and the PTAB decisions are not reviewable by the Patent Office director. On the other hand, the director, who is nominated and confirmed, does have authority over the selection of PTAB panels and the rules under which the APJs operate. On balance, however, the Federal Circuit decided that APJs were principal officers.
Also at issue in this case is whether the Federal Circuit’s fix was an appropriate one. After finding that, as it were, the PTAB APJs were principal officers, the Federal Circuit simply made them inferior officers by severing their tenure protection in order to save the entire statutory scheme. The Appellate Court then remanded the case to a new panel of now newly inferior APJs. Interestingly, all three parties—Arthrex, Smith & Nephew, and the government, which had intervened in the Federal Circuit case to defend the constitutionality of the APJs—all three parties petitioned for certiorari at the Supreme Court.
Now, without saying anything about this case, I was always told that it no one is happy, we probably have found the right answer. With that, I will turn it over to my esteemed colleagues to tell you whether or not this is the right answer and what the Supreme Court might do about it.
I will turn it first over to Dmitry.
Prof. Dmitry Karshtedt: Thanks, Kristen, for that introduction, and thanks for The Federalist Society for having me on this panel. This is a very exciting case, and I think it’s one of those cases where the argument was extremely illuminating. Starting from the end of your discussion, I think no one on the Court liked the remedy that the Federal Circuit adopted, and the real close case will be, obviously, the substantive issue underlying—whether there was an Appointments Clause violation here.
I’ll get to the argument in a little bit, especially the exchanges with Justice Kagan for both private parties’ lawyers that were very illuminating on the history and where the Patent Office deviates from it and whether the practice of speaking for the government without a person being a principal officer is historically established or not.
But I’ll start with making some arguments as to why the Federal Circuit should be reserved on this case. Full disclosure—I signed a brief of constitutional, intellectual property, and administrative law professors so arguing, but here, I’m just speaking, of course, for myself.
I’ll talk about four basic issues here. One is significant authority issue. What is significant authority for principal officer designation? One is what is supervision? It’s looking at it from the director side. What constitutes appropriate supervision for Appointments Clause purposes? And then, the three and the four I’ll talk about are structural and juris prudential issues, like the third thing is deference to Congress. How much deference should there be given to Congress in these sort of constitutional reviews? And fourth is this idea of constitutionalization of history. Where does that get us?
Let’s start with the significant authority part of it. It cannot be that just speaking for the government is already a significant authority. As Justice Breyer indicated, plenty of officials make final and binding decisions on behalf of the government. They cannot all be principal officers. What is the test? Authority has to be not only significant. Significant authority makes one an inferior officer. It has to be uber significant, or more or somewhat or extremely significant for the person to be a principal officer.
What does that mean in practice? We have some examples. Even though this case is not binding in the Supreme Court, Copyright Royalty Judges in the Intercollegiate case were setting rates that were affecting entire industries and so on. Of course, the D.C. Circuit there thought that this was a significant exercise of authority. I’m not so sure a run-of-the-mill patent—and there are millions of patents being issued—applying law to the facts of the case constitutes a significant exercise of authority and actually extremely significant for the principal officer status on behalf of the United States.
This is mere, not rote, obviously—there is judgement involved—but this is basically adjudication of cases under a precedent that the director sets under precedential law from the Federal Circuit. Of course, the legal judgments are open to de novo review from the Federal Circuit, so I’m not sure if this is significant authority.
Yes, as the brief argues, you can lose a case; you can lose a lot of money as an individual party if your patent gets wiped out. That’s absolutely true. But I think probably the Framers contemplated something a little bit more. We hear that in cases like Morrison v. Olson. Authority to formulate policy for the government or the Executive Branch.
That gets me to the second point, and the second point relates to are we talking about supervision here, or are we talking about micromanagement? Because Arthrex’s position is very much on the micromanagement side. Not only do they get does the director set precedents to Precedential Opinion Panels, but also, they have to review potentially every decision in great detail. I think supervision doesn’t have to extend to that.
The director has discretionary power to institute where actually the director makes a decision where the claims are more likely than not unpatentable. That very much biases the decision toward a result, but that’s the director’s judgment. That’s the director’s judgement, the initial institution judgment. And, where the political power exercises is discretionary denials that a lot of people are up in arms against.
But that is, I think, sufficient supervision for constitutional purposes. You don’t have to direct or manage every step of the way and then look at the APJs’ drafts closely to have that level of supervision. There are plenty of ways in which directors supervise opinions. And if the opinions are big and important, like the RPX opinion involving real party and interest, then the director can put himself or herself on the Panel and the chief APJ to make sure that that significant case comes out the way the director thinks it does.
I’m not sure a run-of-the-mill patent that’s disposed by APJ has that level of significance or requires that level of supervision.
The last couple of points, like the deference point. In our brief, we argued that it can’t be that this analysis should be subject to an open-ended multi-factored test where all these considerations are in play. Here, we have inter-branch agreement, and this is not the Morrison v. Olson situation where even though the Court allowed the independent counsel there, Congress passed and the president signed the law designating these officers as inferior. I think that requires some amount of deference, just like we do in other constitutional-type cases.
Now, we argued for simplifying a test. If it’s fairly debatable whether an officer is principal or inferior, I think, in respect to Congress, I think the Supreme Court should uphold the statutory scheme allowed.
That was a big point in our brief. It didn’t come up so much in the argument, but they gave a multi-factored test providing little guidance to Congress as to who is inferior and who is a principal officer seems like an awful way to run a constitutional system, and Justice Thomas in particular was asking about a more bright line test, and Justice Sotomayor said she has friends on the Court, colleagues, who like bright line tests. So maybe there’s a potential for agreement there, whichever way that comes out.
My final point is this constitutionalization of history point. There’s a lot in Arthrex’s brief about how this Patent Office system is unique without intra-agency review. At the same time, if you’re going to constitutionalize history that way, you have to also accept numerous examples of various members of the government making final and binding decisions. Arthrex’s brief sort of knocks them down one by one, saying they’re too obscure or too recent or to unimportant.
Greg will appreciate the Russian saying, “This was a long time ago and not true” type of argument. Kind of knock them down one by one, and actually, major cases like Crowell v. Benson, for example, had where there was a kitchen sink of constitutional arguments, had someone, a deputy commissioner, that was making these binding decisions for the government, and that was not challenged, and that was around for a long time.
I think the constitutionalization of history cuts both ways, and that gets me to the Justice Kagan’s questions. She has both parties. She asked Smith & Nephew’s lawyer, “Is the Patent Office unique? Is it a different animal?” Of course, it’s sort of an administrative agency that pre-dates the ABA and structures are very different.
She also asked of Arthrex’s lawyer, “What about all these other examples? Are all these people principal officers that make final decisions for the government?” I think the question has to come down—what is really significant authority? I’ve told you which side I fall on in this sort of analysis. I’m sure Greg falls on the other side, but I think at least it’s sort of a matter of degree that we can reasonably disagree about, the Court will reasonably disagree about it, and it’ll be a close case.
Prof. Kristen Osenga: Fantastic. Before I turn it over to Greg, I just wanted to follow up with you, Dmitry. You mentioned the brief you filed. Just to give you credit for it, who did you file a brief with, on behalf of, whatever?
Prof. Dmitry Karshtedt: The brief was led by my colleague, Alan Morrison, who argued cases like INS v. Chadha, and I believe Edmond, too, so I defer to him for administrative law expertise. I helped a lot, whether it be other joiners to the brief or another one of my colleagues, Robert Glicksman, who is also an administrative law scholar. On the IP side, there were Mark Lemly and Josh Sarnoff. Mark Lemly of Stanford; Josh Sarnoff of DePaul.
Prof. Kristen Osenga: Great, great. Just in case people want to read your argument in more detail.
Okay, with that, let me turn it over to Greg to give his viewpoint of what happened this morning.
Prof. Gregory Dolin: Thank, you Kristen. Thank you for the kind introduction, and thank you to The Federalist Society. It’s always a pleasure to be back at one of these Teleforums. It’s often a highlight of, at least for me, of a Supreme Court term, in part because I can share my views of the case as well as make myself listen to the oral arguments sooner than I otherwise would.
Let me also, before I begin, and in the interest of full disclosure, also disclose that I filed an amicus brief in this case half disagreeing with Dmitry’s position. So, I was on the other side. It was filed in support of Arthrex, but I think both of us agree. Dmitry didn’t talk much about remedy, and I will, but both of us agreed that the remedy that the Federal Circuit came up with making ABJs firable at will is — perhaps we came up to that result for different reasons, but that’s an incorrect remedy.
Let me take a slightly different tack from Dmitry just for purposes of elucidating the matter for our listeners. I will touch in response to some of Dmitry’s arguments, but let me just run through, fairly quickly, the argument itself and my takeaways from it.
Let me begin with nose counting, and then I will dive into why I think this is the way it is. Although it’s a fool’s errand — I know, Kristen, you promised people that maybe we’ll end by predicting the results. I’m not a gambling man, and so I wouldn’t wager much on my own prediction, but nonetheless, just a bit of a gut feeling given the oral argument.
I think Chief Justice Roberts, Justices Kavanaugh and Gorsuch were fairly concerned with the structure of PTAB and the fact that ABJs do make these decisions. Again, like I said, I’ll get into whether or not these are significant or insignificant, but they do make these final decisions for the government without their decisions being subject to review. Justice Gorsuch especially kept hammering Malcolm Stewart, who represented the government, on this issue of reviewability of decisions and would not accept Mr. Stewart’s answer that removability and the punishment, the stick, is a sufficient level of control. He wanted to know whether or not the decision itself was subject to review.
Justice Kavanaugh as well, he quoted Justice Scalia’s famous dissent in Morrison v. Olson. He said, look, maybe this rule doesn’t quite come as a rule, but it comes not all that disguised either. He was very open with his cards on the table that this concerns him.
Justice Roberts also, I think, gave the government a bit of a hard time. A couple others were also easy to read on the other side. I think Justice Breyer just came out of the gates that, basically, that he thinks the entire line of cases about the officer of the United States was wrongly decided—including PLCB and Seila Law—so he’s just not a fan of constitutionalizing what he thinks are really government employees as opposed to officers.
Justice Kagan, I thought, was initially kind of skeptical of PTAB when she questioned Malcolm Stewart, but then, I think, became even more skeptical of Arthrex’s position as well. Like Dmitry pointed out, she gave a bunch of both historical and current examples of similar type of officers or employees or however you want to classify them that are not subject to Senate confirmation and are not subject to necessarily significant control.
She did express some concern about the uniqueness of PTO and PTAB, but I think, as Dmitry pointed out in this conversation as well as in our private conversation beforehand that that may be the nature of the beast of PTAB, and if anything, that the Patent Office is unique in both directions; both on cancellation of patents and on the granting of patents. Dmitry can speak for himself if he wants to develop that line of thought.
Then, I think there were three justices who were — Justice Thomas, I think, also initially started with being somewhat skeptical of the argument advanced by the government, but ultimately, I think will come down on the government’s side. I think both partially based on his questioning as well as his history of being fairly open to the PTAB style creation [inaudible 00:19:45]. He authored the opinion in Oil States which upheld PTAB against the constitutional challenge that patents can only be invalidated in Article III tribunals as opposed to administrative processes.
That leaves open kind of the big question marks. It leaves open Justice Alito and Justice Barrett. Again, if I were a betting man—and I’m not—I think they will probably lean towards Arthrex, but I think a lot will come out in opinion writing as more exploration of history.
So that’s, I think, how the argument went. I think — for example, just again, just a couple of highlights. I think Justice Alito, for example, was really concerned with this lack of a bright line test. He started reading to — I forget whether it was to government attorney or to attorney for Smith & Nephew. He basically started reading this laundry list that the government’s admitted saying, “Look at all these ways that APJs are controlled by the superior officer, such as Patent Office director.”
They’re like, “Well, what if I take this one way and this one away and this one away. When will we be on the other side of the line?” I don’t think he got a satisfactory response. In fact, I think the maximalist position advanced by Smith & Nephew was essentially boiled down to anybody who is not in the cabinet or heading an independent agency, by definition not a principal officer, I don’t think will have any buyers, maybe save for Justice Breyer.
And Justice Barrett as well. I think she was the same sort of way. I think she was a thumb on the scale for Arthrex, but ultimately, I think will come out in the writing.
Again, if gun to the head had to predict, I think it would be 5-4 affirming the Federal Circuit on the violation, but I think 0-9 on affirming the Federal Circuit on the remedy. I think the remedy will be quite different.
With that, let me — and we can talk more about what the remedy might be or whether or not there will be a remedy or just the Court will kick the can down to Congress. But let me just kind of answer a couple of Dmitry’s points because I think they’re important. I think they’re well thought out; I think they’re important. But ultimately, I’m not convinced.
What I think the Constitution can be run on — let me actually take a step back. Let me say where I am in agreement with Dmitry. I think he is right that not every decision that’s ever made by the federal government must be made by principal officers. For example, Justice Breyer made some, I think ultimately sort of hypotheticals, but they make a point. Just because a doctor at a VA hospital makes an appointment for you, and that’s kind of a decision in that you have to show up, especially if the appointment is at about disability benefits. If you blow off that appointment, you may not get your benefits. I don’t think that the scheduling of your appointment must be done by an officer of any kind much less a principal officer.
So, I think that’s right. There’s got to be some sort of significance to the decision. At the same time, I don’t think you can run the Constitution on the basis of ex post figuring out is this patent really important or is it not really important. So, I think we kind of have to decide are patent rights important? Maybe Dmitry thinks that there are some not important enough, especially since there’s countervailing considerations about precluding others in the public from practicing the patent, eliminating their rights.
I think that’s an entirely legitimate position to take. Maybe one that I will disagree with, but I don’t think that we can do ex post. We can either say, look, patents are the type of decisions that should be done by principal officers or should not be done by principal officers.
In the brief that I filed on behalf of Cato and myself, and hopefully if Ilya Shapiro’s on the call, who was co-counsel on the brief, he will see that I’m not hopefully misrepresenting Cato’s position in this brief. It’s that it’s somewhat odd to have a patent issued by a principal officer—which may be in name only, but nonetheless, the patent is signed by the director of the Patent Office—only to be canceled by non-principaled officers. To quote Justice Kagan, “It’s an odd bird.”
Ultimately, I think that if it’s done by principal officers up front, then it has to be done by a principal officer on the back end.
Dmitry also relies on a couple of [inaudible 00:24:09] in Morrison v. Olson, which, to be fair, is still good law, but it’s certainly a much-criticized law. And I think more and more people are of the view that it was wrongly decided on. I think I’m one of those people. So I don’t know how much water — again, it is certainly good law. It is certainly citable but has not been formally overruled, but ultimately, I don’t know how much weight that case can hold.
And then this issue of congressional deference. Certainly, I think there must be a presumption of constitutionality to any act that the Congress passes. We must presume, both as a legal matter but also as a general matter—something that I think we’ve been losing in our society generally—that political actors and legal actors are acting in good faith and are acting with deference to what they think the Constitution allows and permits and requires. There’s got to be some deference to Congress.
But at the same time, in separation of power cases where one branch is trying to aggrandize to themselves power is exactly one of those cases where I think scrutiny has to be [inaudible 00:25:13].
Finally, to the point where I violently agree with Dmitry is the multi-factor test is a bit of a problem because it doesn’t give any guidance to anyone. It’s just throw a whole bunch of things up against the wall and see what sticks. The Cato brief proposed a bright line test, drawing on a word by Professor Gary Lawson, saying that in order for somebody to be an inferior officer, the decision itself has to be reviewable and not just have there be a threat of termination afterwards or reassignment to some other position or something else.
Obviously, Smith & Nephew proposed a bright line test that unless you’re in a cabinet or have an executive agency, you’re not a principal officer. There could be lots of bright line tests, but I think I’m much more in favor of bright line tests. I think, if nothing else, I would hope that that’s what the Court comes up with. No guarantee, but ultimately, I think Kristen may be incorrect in her introduction that this is an important case for patent law. It might actually be a very unimportant case for parent law because even the restructured board might ultimately reject this particular patent and not much might change on the ground, but it might ultimately be a much more important case for admin law than it is for patent law.
With that, I think I’ll turn it over back to Kristen for either follow-up questions or to open it up to the public; however, she, in her moderator capacity, believes we should proceed.
Prof. Kristen Osenga: Okay, well, thank you Greg. I think what I want to do first is give Dmitry just a minute or two to respond to any of the violent agreement I think you said you might’ve had with him. Maybe he needs to defend himself against violently agreeing with you. Dmitry, any responses you have to what Greg said?
Prof. Dmitry Karshtedt: Sure. This is a very powerful response by Greg, and it sounds like we agree on a lot of things. For example, a bright line test. Just on the importance of it, I want to say that I think it depends on what is important. I think it’s the issues that are important; not any individual patent. Setting admin policy—what are private party and interests—that’s extremely important, and that’s something the director can control.
I think any individual patent, in the grand scheme of things, maybe has less of a degree of importance. That’s where I stand.
On Morrison, I actually think Scalia wrote a great dissent, but remember, that deals with an inter-branch disagreement and inter-branch appointment. This is what Scalia’s dissent says. “Where the issue pertains to separation of powers and the political branches are in disagreement, neither can be presumed correct.” For the AIA, both branches are in agreement, and in fact, violent agreement. I think the vote was like 89-10, and then the president signed it without any threat of a veto. So we’re talking about some kind of deference to the political branches as to whether they know what they’re doing when they’re designating officer status.
Which, I guess, leads to my third point. Yes, we don’t want a review that has no teeth whatsoever. We’re talking about issues that are reasonably debatable, like significance of individual patents versus issues. What is significant authority? I think maybe some deference should be given to Congress.
Again, our bright line test in our brief is essentially a strong presumption of constitutionality of things like this. I don’t think the Federal Circuit discussed any presumption of constitutionality in any context. I realize that this sort of constitutional challenge is not subject to an irrational basis review, levels of scrutiny, the way that fundamental rights are, but I think there’s got to be some thumb on the scale in favor of the political branches where they agree, unlike in Morrison where there was an inter-branch appointment.
Overall, I think it’s become clear that a clear test is necessary after this argument so Congress can legislate in the background of this constitutional law. I think one approach here — the Court really didn’t block the system. You can see that in the end. In Northern Pipeline, the Court stayed the judgement for Congress to fix the situation. We’ll probably discuss this more, but Congress already fixed the Trademark Trial and Appeal Board by providing a review in the director of TTAB decisions. Maybe the same could be done here so this kind of thing can go away.
Obviously, it’s an important structural limit, but it is fixable. To the extent the director can delegate everything to the board anyway, it’s not clear if the fix is actually somewhat meaningful from a constitutional perspective. Arthrex’s argument was that it was because there’s more accountability and so on. I take that point, but I think we’ll have to see.
I think the Supreme Court did not really want to get into a remedy. Maybe we’ll discuss this more because it just seems like a mess. The Federal Circuit’s approach was not favored, but then blue-penciling director review, especially when Congress already provided, in a very similar context, actual director review or some kind of rehearing opportunity for a hearing, and so on. It seems like it becomes like judicial legislation.
So that’s the problem we’re facing. The Court doesn’t want to do it, but the Court, as Greg correctly said, I think you can count five justices, at least, to have serious doubts about the constitutionality of the scheme, in which case they’ll have to confront it in some way. Maybe the Northern Pipeline approach of staying the judgement and getting Congress to act would be the best way to handle it.
Prof. Kristen Osenga: Okay, I promised people a prediction. Greg didn’t predict, but then he threw out 5-4, 0-9. Dmitry, do you have any numbers you want to throw out at as a prediction? And then I’ll ask you guys some questions.
Prof. Dmitry Karshtedt: Gosh, I can see a 5-4 to reverse because Arthrex’s counsel basically said there is no acceptable remedy that the Court can get right; only congressional remedy. The Court didn’t really want to punt this to Congress. I would say, for that reason, it’s a 5-4 reverse, and then that’s the case, then no remedy is necessary. I’m evading your second question.
If it comes up the other way around, if it’s an affirm, then who knows. I think my prediction would almost be to stay the judgement for which there’s precedent because the Court doesn’t want to get into the business of legislating and writing proper constitutional schemes here.
Prof. Kristen Osenga: Okay. Well, since you said you didn’t want to talk about remedies, let’s talk about remedies. A question for both of you. If this is not the remedy, and it sounds like you’re in agreement that this is not the right remedy, a couple of different things have popped up through this conversation. They could make it like the TTAB with the director review, they could stay it and let Congress fix it, but what would be the best fix there to fix the problem? Yes, I know Congress can fix it, but what would you have them do?
As far as the TTAB with the director review of it, I’m wondering if that doesn’t get us back up into some of the issues that people have said that it’s so stacked against the patent holder because the institution decision is already at the director level. Isn’t that basically saying the director of the Patent Office would institute this, and then he would review whether or not the patent is found invalid? It sounds like we’re putting an inordinate amount of power with the director then.
I’ll go ahead and turn it to Greg first. What’s your favored remedy if this is found to be unconstitutional, and how would that work?
Prof. Gregory Dolin: I think there’s my favored remedy, and I think what’s plausible within the context of this [inaudible 00:32:52] upheld before. Anybody who has ever read my writings or even my briefs knows that I’m no fan of PTAB, and I think it should’ve been struck down back when the Court was discussing Oil States. My favorite remedy? This all goes away and we go back to the way things were before AIA, but I don’t think that’s realistic.
In our brief, we urged the Court not to come up with a remedy. We pointed out some potential ones, but said it’s not for the Court to write. One potential is having the director — creating two additional principal officers. A director is already a principal officer. Making perhaps a commissioner of patent, also Senate confirmed, as well as the chief judge of the PTAB.
That way, they would constitute that processional opinion panel who — in that case, they would be able to really review any decision, either for law or facts or whatever else they wanted. The fact that they don’t do it for every decision—as Arthrex’s counsel suggested that the Supreme Court also doesn’t review every decision that comes out from the federal courts—and I think that would be fine.
If that were the case, perhaps, for due process concerns, so as not to subject the patents to political pressure, perhaps those individuals, at least two of them, could serve a set term so that the president can’t just call up and say, “Look, I don’t like Apple or I don’t like Twitter because they kicked me off, so I want Twitter patents canceled.” Something along those lines.
Obviously, this is not something that the Court can come up with; it’s something that Congress has to do. I actually haven’t thought — Dmitry has, as usual, helped me think through some issues and reminded me of some other cases that I haven’t even thought about.
But I completely forgot about the stay of judgement in Northern Pipeline, and I think that is a plausible way to go. Give Congress an opportunity to fix it. Perhaps also add some bipartisan to Washington because this is a very bipartisan bill. Maybe this is another one of those feel-good legislations where everybody can get on board and fix a constitutional problem. Perhaps too much to hope for, but that would be favorably the reality, if possible. I think that would probably be my favored remedy.
Let me just add one quick thing, and I apologize. The reason at least I think the remedy that the Federal Circuit came up with is inappropriate is that it really doesn’t fix the problem. If the problem is that the decision is not that what makes someone a principal officer is the fact that their decisions are not reviewable, and in this case, APJs are just not reviewable, then make APJs terminable at will or not involved in any way. That doesn’t really address that point.
Now, if that’s not a problem, then it’s hard to see how Arthrex’s case holds up overall. It’s in Congress, or let’s use the law professor, or words favored by law professors, the remedy is entirely orthogonal through the problem identified by the Federal Circuit under Arthrex.
Prof. Kristen Osenga: Go ahead, Dmitry.
Prof. Dmitry Karshtedt: Thanks. I think we actually said this. I was going to jump in and briefly — the remedy and the constitutional judgement have nothing to do with one another. I think that language comes from our brief too.
But, Kristen, this is a great question and allows for a little bit of speculation. But let me just start with this idea that the PTO, under these approaches, can’t win. If you fixed the Appointments Clause problem, then the director all of a sudden has too much power and may be is subject to political winds. If you give APJs some independence, all of a sudden this is an Appointments Clause problem. Which makes you wonder, are we trying to get the system out worse or just going to be like the PTAB? And maybe the answer is all like the PTAB.
I filed a brief challenging PTAB to an oral statement. On that issue, I was 100 percent with Greg, but I don’t think we should be trying to bring down the PTAB by any means necessary. On this issue, I agree with the government.
In terms of fixes, I think the TTAB fix is acceptable, and I think what’s holding it up, though, is just patent law tends to be much more controversial than trademark law. Of course, the stakeholders and the senators who are [inaudible 00:37:07] will want that to be a vehicle for more reform, like Section 101 reform, an issue that’s near and dear to all of us, at least all three of us. It can’t just be a simple fix. There will be more opportunity for stakeholders to weigh in, and all of a sudden, we have not just a quick fix but big patent legislation.
Maybe that is necessary, but maybe that will take a long time and generate some controversy. In 2019, we didn’t get very far on 101 reform. So that’s one potential question as to whether other things are going to come in.
In terms of Greg’s point about having a director that is somewhat independent I think has a great deal of merit, and I think there’s no reason why, if you have independent International Trade Commission, if we have an independent FTC, why can’t the PTO director have that sort of independence? If you are setting policy that’s important for the nation’s commerce but also want to be somewhat isolated from political winds, I can see legislation, or I can see support.
And maybe that is our ultimate fix—to give the director power but also some independence where they can be insulated from this at least an attack or insinuation, or maybe it’s real, that they’re being influenced by too much lobbying, too much power. Maybe that’s okay, and ultimately, the answer is political accountability.
If you don’t like the way the president is pushing the PTO, you can vote for someone else, but maybe that’s not acceptable when it comes to at least what we want to be a neutral adjudication. We don’t want the Patent Office to favor some parties over others and not apply the law. But at the same time, at least on policy, the Patent Office, they have historically had a certain position on Section 101, for example. No software patents or utility requirement for chemistry.
The Patent Office has always had that sort of policy drive. It didn’t necessarily come from the president. It’s unclear where it came from, but I think there’s some value to having that under political control as opposed to messing with individual determinations, run-of-the-mill determinations where we don’t need people principal officers. I think that’s unacceptable, and I think maybe that’s part of the package that will be reformed that we might see.
Prof. Kristen Osenga: Okay. So not a whole lot of wherewithal to confirm every single APJ by the Senate. That’s not the answer we’re headed for, for either of you, I’m thinking.
Prof. Dmitry Karshtedt: Doesn’t sound like it.
Prof. Gregory Dolin: I know. We have a hard enough time confirming Article III judges. I doubt that the Senate has time. Although, I suppose the minority party will also love it because it’s just an opportunity to slow down everything else. So, it’s one of those filibuster-pro Senate being a graveyard for lots of things, which sometimes may be good, sometimes may be bad.
One quick response to Dmitry is, again, I am of two minds on generally independent and tenured agency heads. I generally like the idea of political accountability, but that ultimately goes back to the problem that I’m having with administrative patents cancellations. Which is, on the one hand, you want it to be insulated from political winds; on the other hand, you want the executive branch to be ultimately responsible to the president. Sometimes those two are not compatible.
If we accept that we are stuck forever with at least some of our political appointees being tenured for some period of time, the only one concern in making the director tenured is the Seila Law. You cannot have a single director that is both tenured and not part of a commission. That’s why I said perhaps make the director of patents not tenured, but commissioner of patents and, say, a chief judge of the PTAB tenured, plus a director who is not tenured forming this kind of [inaudible 00:41:14] that will be able to review decisions. Maybe that will pass constitutional muster.
Again, I think there’s lots of creative solutions that can be had. Again, Dmitry and I are often in agreement here as well. Obviously, we may disagree more on the margin. I agree that end doesn’t justify the means, and we should take down, as much as I dislike PTAB, we shouldn’t take it down by these bad constitutional theories. If the theory is bad just because you [inaudible 00:41:48]. So that’s why he’s said he adheres to the originalism and textualism. Just because a five-member Supreme Court majority might occasionally reap good results doesn’t mean that we should be ruled by nine people in black robes.
I agree that we shouldn’t deform the Constitution in order to reach a good result with respect to PTAB. At the same time, I don’t think that holding both branches—the federal executive branch and federal legislative branch—to the requirement that people making big decisions be properly appointed. I don’t think that actually is deforming the Constitution. I think, ultimately, our disagreement with Dmitry is not even on that but on what counts as a big enough decision.
Prof. Kristen Osenga: Okay. We are starting to get some questions in the Q&A box, so I do invite the audience to go ahead and type their question into the Q&A box, and we will answer some of those. I have my own questions for you guys, but I know both of you, so I’ll just as you later. Let’s let our audience ask some questions.
I’m going to go ahead and pose these and let you guys go ahead and take a crack at them. The first question we have is from Conor Craft and asks, “Do you think the Court’s opinion will address the de facto officer doctrine at all?” What do you think, guys?
Prof. Gregory Dolin: Once I get hired to clerk for the Supreme Court, I’ll be able to tell you better. But in the meantime, I suspect that there would be maybe a footnote explaining why the 2,000 patent cancellations that you mentioned at the opening of this Teleforum are not — basically why those patents do not get revived.
There may be a footnote with a nod to de facto officer doctrine, something along those lines. I don’t think there’s going to be a whole section dedicated to exploring this. That’s not on what cert was granted. That’s not anything that was explored in oral argument. Although I haven’t read all the amicus briefs, I don’t think that’s anything that was covered, at least in any great depth, in any of the amicus briefs, either.
Prof. Dmitry Karshtedt: Yeah, there was an amicus brief that maybe — not through de facto officer doctrine, but maybe it’ll get us to the same result of this idea that once there’s a judicial fix, it applies retroactively, and it actually doesn’t require any remands or [inaudible 00:44:04] because the decision was right of an issue. It’s not the judicial decision—and Andrew Michaels filed a brief on that point—a judicial decision kicks in and all of a sudden fixes everything with the PTAB. I’m not sure if I agree with that approach, but that could be a way to say, well, there were valid all along even though [inaudible 00:44:23] confers validity. As I understand the doctrine, it confirms validity upon acts even though it’s later discovered that the official was not validly appointed or something.
I don’t know how much bite it modernly has, and I confess not knowing that much about the doctrine, but the retroactivity approach may get us to the same approach. But it wasn’t really aired, it wasn’t asked about, and it didn’t seem like that was an important part of the remedy or the Court’s consideration. I think the idea is these acts are very in limbo. After the Federal Circuit’s decision, may continue to be in limbo, but I’m not sure the Court was getting in the direction of fixing that.
Prof. Kristen Osenga: Okay. Our next question comes from Kevin Madigan and takes us into the world of copyright law. “There will soon be an administrative tribunal established within the copyright office to hear small claims court cases. This copyright claims board will be overseen by three officers who are appointed by the librarian of Congress who is herself a presidential appointee.
“I know that the CASE Act was specifically designed to avoid some of the constitutional concerns that have been raised in response to the PTAB, but I am curious if you anticipate that there will be similar Appointments Clause constitutional challenges to the copyright claims board?” Thoughts, guys?
Prof. Gregory Dolin: Dmitry?
Prof. Dmitry Karshtedt: It’s another thing I confess is outside entirely my area of expertise. I’ve followed intelligent discussions about the CASE Act by people like Zvi Rosen who know more in this area than I do. I’ve read constitutional analyses of it and that there is a fairly narrow adjudicatory role. Maybe the fact that it’s a small claims type — I think it gets into our question as to what is significant.
To some people, those small things are significant. I don’t know. Is it a matter of a figure? Arthrex’s brief says well, there’s going to be billions of dollars at stake now, which is true. But do these constitutional distinctions hinge on the amount of money at stake? I think it’d be, again, hard to imagine that this is what the framers predicted.
I think the appointments — there is various other constitutional issue that has been raised, as I understand it. A Seventh Amendment issue, Article III issues, due process issues [inaudible 00:46:41]. I think the appointments issue is maybe the last thing to worry about. Not that I’m not glad to hear from Kevin, but I think as an appointments issues, might be sort of thrown in there. But any time you move the adjudication to a non-Article III tribunal, all those issues can come up.
I’ve quickly looked at the analysis from the Copyright Alliance. I didn’t find an Appointments Clause analysis, although, found just about every other constitutional issue that comes up in these contexts. Doesn’t mean that it wouldn’t have merit, and I believe Zvi mentioned something about merit, but I am honestly not sure. Maybe it’s another pitch for deference from my angle.
At least Congress here has thought about the constitutional issues. Whether that’s a reason to uphold a system, I’m not sure. But comparing it to other cases where Congress is presumed to act in good faith, and only if there’s animus or bad faith we’ll strike things down. Here, it’s clear that there was an effort, a thought, that went into compliance with Appointments Clause precedent. I think that should count in favor of Congress in general.
Prof. Gregory Dolin: Much like Dmitry, copyright law is not really my area of expertise. I might be wrong, but the last I heard about the CASE Act is that the process was voluntary, so if that’s still true, I think it presents an entirely separate set of problems or perhaps non-problems. Because, if it’s a voluntary thing, it’s almost as if government provides you with free or nearly free or low arbitrators. You can always to an arbitrator. You can always go to a random guy in the street and ask him to settle your dispute. These are slightly more sophisticated random guys that are paid for by the government.
I think, in that situation, the Appointments Clause problem is much more attenuated. Yes, they might still speak on behalf of the government. Yes, they might still cancel your copyright registration or give you too little of a recovery, but ultimately, they only have their power because you’ve agreed to give them their power in each individual case, if I’m correct, if the CASE Act did come out the same way that I think less remember it being discussed.
Of course, PTAB is not the same way. You can be hailed into PTAB against your wishes, and in fact, after having sued somebody in Article III court as an end-run around Article III litigation.
Again, on the understanding that I have of the CASE Act, I think it’s much less of a problem. If my understanding is incorrect, then my answer would change accordingly.
Prof. Dmitry Karshtedt: Maybe to quickly to follow up. The voluntariness point of it is interesting. We haven’t talk about Freytag and Edmond much. Obviously, they have been front and center in this litigation. But Scalia and, in Freytag, said there’s got to be an element of consent here to the system or a waiver or something. The patentee has opted into the system. They chose to get a patent.
And this came up in other issues. Knowing that there’s all these re-exams, and that’s been in constant flux since the early ’80s. So, I’m not sure which way that cuts. It’s not voluntary at that point, but you don’t have to get a patent and opt into the patent system.
The consent point hasn’t really come up in this litigation, but I think Scalia’s dissent in Freytag, I think, his dissent in part or concurrence in part were actually quite persuasive. You chose the tax court. Why are you complaining about it?
Prof. Kristen Osenga: Okay. Another question from an anonymous attendee. “Several justices seem concerned that a ruling in favor of Arthrex would cause upheaval through the federal government. Do you think there’s a path where the Court may cabin its ruling to officers acting in an adjudicatory capacity and say that, in those situations, review by a properly appointed principal officer is required?”
Prof. Gregory Dolin: I think that, ultimately, it’s not so much about adjudicatory. I think it only goes back to what Dmitry’s point was and where, like I said, where our only disagreement is, is how important the issue is that’s being decided. I think an adjudicatory capacity, especially when you’re adjudicating people’s property rights, and of course — I know that in Oil States, Justice Thomas wrote for a seven-member majority that these are privileges and these are government-granted—what’s the word he used? Not privileges—anyway, sort of government-granted monopolies type of things. I’m blanking on the specific word that he used. Ultimately, everybody agrees that patents have at least some property-like component, like the statute says that they should be treated as personal property.
When a government actor can act in a way that significantly affects your property rights, I think that’s where the flags start going off. How to write it, whether you have to say only in an adjudicatory capacity or something else, it’s a different matter.
I would highlight, for example, for a lot of — for example, in the social security context, yes, ultimately a lot of things are delegated to the ALJs, and then the Appeals Council, but at the end of the day, the decision rests—even though the commissioner does not personally review every single determination—rests with the commissioner.
With ITC, oftentimes you would have a trial in front of ALJs, but ultimately, it’s the commission that either affirms or reverses, and they have this power with no review. It’s not so much the adjudicatory thing. It’s this idea that who makes the final determination, including in an adjudicatory context?
Prof. Dmitry Karshtedt: Great question. My administrative law colleagues are certainly concerned because of the upheaval that this decision could cause. A lot of government officials that perform these decisions. I guess you could call them adjudications. Maybe the harder line is to a cabinet adjudication away from other things since, in the Fifth Amendment due process context, the right-privilege distinctions have sort of gone away, and welfare benefits or things like that could be an adjudication right. Same as every welfare officer, principal officer, and so on and so forth. These are the questions to ask.
I don’t think Section 261 resolves the issue, with respect to Greg. Can have attributes of personal property might mean they’re just assignable and that’s it. It doesn’t mean there’s some sort of magic property right there. But I think more importantly is that a lot of what the government officials do — Kennedy viewed this as adjudication. Yes, here we’re applying the law to the facts, but that comes up.
In the veterans’ benefits context, as Greg said social security context, and so on, and I think an entitlement to a government grant of some sort in the official deciding whether you’re qualified for it; that is an adjudication. I think adjudication happens everywhere in our government, and I think we’re stuck in this position.
Are patents more significant for Appointments Clause purposes than someone’s relief check or something like that? Again, it’s less money, maybe, but it’s maybe that money is important to that person and doesn’t come down to pure numbers. That’s why I think the significance ultimately has to be in policy issues not these individual resolutions.
Prof. Kristen Osenga: Thank you for answering that. We’ve made our way through our queue, so I’m going to ask another question that’s somewhat related to the last question. If we don’t want to cabin it based on adjudication and we need to think about significance and what have you, is it possible that we could or should avoid government upheaval by just saying that patents are weird, the PTAB is weird, and nothing we say in this case has any reach outside of this? What do you think about cabining this just based on the weirdness of patents and/or the PTAB?
Prof. Dmitry Karshtedt: Maybe I’ll take a shot at it. I think the Court’s credibility can be damaged by this approach, although, there’s definitely reasons to like it. It’s sort of a Bush v. Gore approach. You can’t cite it for anything else. Clearly, it is getting cited for other things, and you can’t just tell parties not to. It’s whatever comes out of the courts. I think it may be possible to describe the patent system as a weird animal. I think it is obviously true. It predates the ABA.
But cases like Dickinson v. Zurko and others have brought the patent system into the modern ABA framework, and that’s been very much the trend. And Cuozzo and Thryv, the appealability issues are cross-cutting admin law issues. The Court has at least tried to have a patent non-exceptionalism in other areas too.
I can see the concern, and I can see a narrowly cabined decision maybe pending a congressional fix. But I think it’s hard once you let the cat out of the bag to limit it to this agency. But I’m not sure. I didn’t clerk in the Supreme Court either. Maybe it’s possible to craft a solution. Maybe a good solution, as Kristen suggests, and avoids larger turmoil in the federal government.
Prof. Gregory Dolin: I’m not generally a fan of these ticket-is-good-for-one-ride-only coming from the Supreme Court just because they get 80 cases. They decline about 8,000, and so the 80 cases that they take have to serve as a guidepost for the 8,000 they don’t take.
I think the Supreme Court has made some decisions that are in patent law that are, if not incomprehensible, then at least unilluminating, so we don’t really know what kind of — what is allowed. For example, the 101 decisions — all of us here on this call teach patent law, and I’ve done it for a number of years now, and I still don’t know how to teach 101 because the Supreme Court just kind of made a mess out of this thing.
I’m not a fan of that kind of saying, look, patent law is a weird animal and therefore we’ll just treat it differently. I think Dmitry is right. It would be inconsistent of what they have done over the last decade, at least, or so.
But also, I don’t think you need to. I think you can just say that people who speak for the government on important issues, more than a doctor’s appointment, have to either be themselves confirmed by the Senate or have to have their decision, even in rare cases, but after a decision be reviewable by people who have been confirmed by the Senate. The fact that it doesn’t happen every often is fine. It’s just the fact that that possibility has to be there.
Prof. Kristen Osenga: Okay, well, with that, that gets us to the end of our hour, so I want to thank both Greg and Dmitry for this fantastic discussion, and I’m turning it back over to Nick.
Nick Marr: Thanks very much, Kristen. I’ll just offer a quick thanks to everyone for joining us on behalf of The Federalist Society. Of course, thank you for joining us this afternoon and for our panelists for participating, for Kristen for moderating, for our attendees and your great questions.
As always, we welcome your feedback by email at [email protected] Also, be checking your email accounts and our website for announcements about upcoming Teleforum calls and Zoom events like this one. We’ve got several more oral argument reviews scheduled this week as the Court’s getting back in session, so be sure to tune into those.
Thank you all for joining us. We are adjourned.
Associate Professor of Law
University of Baltimore School of Law
Associate Professor of Law
George Washington University Law School
Austin E. Owen Research Scholar & Professor of Law
University of Richmond School of Law
Federalist Society’s Federalism & Separation of Powers Practice Group
Federalist Society’s Intellectual Property Practice Group