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June 24, 2021

What to Know about the Supreme Court’s Arthrex Decision

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What to Know about the Supreme Court’s Arthrex Decision

June 24, 2021

Author: John Dragseth

On Monday, the Supreme Court issued its decision in three related appeals popularly called Arthrex. We previously published an alert with a summary of the different opinions in that decision. This alert focuses more on practical considerations and tips that may arise because of the Arthrex decision.

Overview

In Arthrex, the Court found that Administrative Patent Judges (APJs) and the Patent and Trademark Office (PTO) were issuing decisions, such as in inter partes reviews (IPRs), that adjudicated the property rights (patent validity) of private parties. A splintered Court held that that is the sort of important thing that should not be done by people who have not been nominated by the President and confirmed by the Senate. It thus held that the Patent Act should be interpreted, or implicitly modified, to give the PTO Director discretion to review and overrule decisions by the APJs, and remanded so that the Director could apply that discretion.

What Will the Federal Circuit Do Next?

There is no pressure on the Federal Circuit to act quickly. There is a good chance we will learn more about what the court and the government are thinking at two oral arguments on the court’s July calendar in cases that have raised the Arthrex issue: (1) Almirall v. Amneal (No. 20-2331), to be argued a bit before 10:00amET July 8, and (2) Magseis v. Seabed Geosolutions (No. 20-1346), to be argued a bit before 10:30amET July 9. Other panels are sitting on cases that were argued in prior months, and they can be expected to issue opinions first—though it seems they will want to hear from the government before they make their rulings. Remember that the court acted in a very coordinated fashion when Arthrex first issued, so it is reasonable to expect the court will again try to speak with one voice now. The big question is whether the court will uniformly remand for potential Director review or be more case-specific, such as by asking the appellant whether it wants Director review, refusing to remand cases where the appellant is the petitioner, and the like.

Relatedly, about a dozen post-Arthrex certiorari petitions are pending at the Supreme Court, and maybe a similar number will be filed in the next few months. The Court will likely GVR (grant, vacate, and remand) those this week or next, and send them back to the Federal Circuit in parallel with Arthrex. The Federal Circuit adopted a rule that a party needed to raise an Arthrex objection in its opening appellate brief or waive it, and the Supreme Court has denied a number of post-Arthrex petitions, we presume because it is respecting the Federal Circuit’s waiver rule.

What Will the PTO Do Next?

Although the Arthrex case itself won’t return to the PTO for several months, the PTO faces incredible pressure to act quickly from the constant flow of IPRs reaching final written decisions. We expect the Director will provide some mechanism requiring disaffected parties to petition for Director review so that he doesn’t have to consider every case, and so that the alleged error is focused for him. One question is whether he will still have petitions for review by the APJs, and if so, whether the petitions to the Director would occur at the same time (like a Federal Circuit combined Petition for Panel Rehearing and Rehearing en Banc) or would follow in sequence (which would be cleaner but would take longer), or some hybrid.

Among various issues the Director will need to consider are: (a) whether petitioning to the Director will be a prerequisite to a Federal Circuit appeal; (b) whether a petition needs to identify all alleged errors by the APJs (such that only such identified errors could be appealed to the Federal Circuit); (c) whether the Director summarily denying a petition will result in the Director adopting the APJ opinion as his own; (d) which decisions the Director will make precedential and binding on other panels, and how he will do so; and (e) whether the Director will feel a need to take consistent positions in all cases, and whether parties can argue error where he does not.

The Director cannot do this alone; he will need to delegate. He will need to build a “review team,” and this will take time. There will be questions about how much time and judgement he personally must put into any case, or whether he is okay as long as he takes the blame for anything that comes out of the review team. As a practical matter, he will likely grant only a small portions of the petitions, which could lead to claims that the review team is not providing enough review. We note these as possibilities to highlight the potential complexity of the problem rather than as a prediction that any of this will occur.

Finally, the current Director is an interim director, which means he will need to be concerned about adopting policies that could handcuff his successor.

Do Petitioners and Patent Owners Face the Same Issues?

Probably not. The Federal Circuit held in Cienna Corp. v. Oyster Optics, LLC, __ F.3d __ (Fed. Cir. 2020), that petitioners forfeited any objections to the old PTO structure by availing themselves of IPR. Someone may try to distinguish Cienna because the problem with the structure that the Supreme Court identified (APJ’s opinions aren’t reviewed) is different than the problem the Federal Circuit identified (APJs are easily fireable)—but Cienna is likely binding until then. But this doesn’t answer question of whether the Director, as a practical matter, will listen to rehearing petitions from both patent owners and petitioners. Indeed, making the Director review process more open—at least for issues of broad importance—may help solve some of the problems of providing “precedents” that the APJs need to follow.

What Should Parties Do Next?

Generally, if you are on appeal, keep making the objections you would have made before the ruling, but change them from “the APJs are invalid” to “we didn’t get a chance for Director review.” If you are past the Federal Circuit, you may need to file a short certiorari petition that says you want a GVR explaining why your facts are analogous to Arthrex and how you preserved your objections. If you are at the Federal Circuit, you will want to raise the issue in your opening brief, and if that time has passed, you might want to briefly ask for relief via a Rule 28(j) letter, or (more aggressively) by motion to vacate and remand. Of course, not everyone wants to raise this issue, but that is a case-by-case determination.

If you are at the PTO, you will first want to consider whether petitioning for Director review is likely to help your case. If you already have a FWD or get one soon, you could petition for rehearing from the APJs, in part to buy time for the Director to implement his new process, and/or you could appeal to the Federal Circuit and argue in a motion or in your briefing that the case should be remanded. A benefit to doing so by motion is that it avoids the cost of briefing the merits and the time needed for a full appeal.

If you are on the “winning” side, there likely isn’t much for you to do.

What are Likely Longer-Term Outcomes?

We will all be watching the Director’s work closely to see if and when Director-based petitions (if that’s what he adopts) work. If the Director uses such petitions as an opportunity to set high-level policy, then parties will likely frame their petitions in terms of higher legal points rather than deeper factual issues. If he uses them as an opportunity to clean up smaller errors by the ALJs (but not change results), disaffected parties will stop using Director-based petitions because his work will hurt their odds with the Federal Circuit. Too much is uncertain now to guess whether this will be a big deal, no deal, or something between.

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