Deep Dive Episode 193 – Arthrex: The End of Patent Exceptionalism in the Administrative State?
The decision in United States v. Arthrex was extremely fractured, with a mix of majority, concurring, and dissenting opinions that cut across traditional jurisprudential divisions on the Supreme Court. Although the split majority held that the appointment of the Administrative Patent Judges at the Patent Trial & Appeal Board (PTAB) violates the Appointments Clause, the Court ultimately remedied this constitutional violation by revising the America Invents Act to give the Director of the U.S. Patent & Trademark Office (USPTO) more direct review and control over the decisions reached by the PTAB concerning the validity of patents. Although this makes the PTAB decision-making process at the USPTO more like the adjudicatory processes at other agencies, in which agency heads have direct oversight and control over their administrative law judges, it raises fundamental questions about the PTAB process created by Congress, which was supposed to consist of solely legal analyses of the statutory conditions for patentability, free from political influence.
Some have criticized the PTAB’s operations for significant due process problems and other “shenanigans,” but others have defended the PTAB as serving an important function as a corrective mechanism for mistakenly-issued patents that undermine the efficient operation of the innovation economy. This panel of experts discussed Arthrex and the ultimate effects that it may have in patent law, administrative law, and the innovation economy.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
[Music and narration]
Introduction: Welcome to the Regulatory Transparency Project’s Fourth Branch podcast series. All expressions of opinion are those of the speaker.
Host: On August 17, 2021, the Regulatory Transparency Project hosted a webinar discussion entitled “Arthrex: The End of Patent Exceptionalism in the Administrative State?” The following is a recording from that event. We hope you enjoy.
Nate Kaczmarek: Hello and welcome to this Regulatory Transparency Project webinar. This afternoon, we’ll be discussing the Supreme Court’s decision in Arthrex and whether or not it portends the end of patent exceptionalism in the administrative state. My name is Nate Kaczmarek. I am Vice President and Director of RTP. As always, please note that all expressions of opinion are those of our guests.
Today, we are very happy to have Professor Jennifer Mascott as our moderator. Jen is an Assistant Professor of Law and Co-Executive D0irector of the C. Boyden Gray Center for the Study of the Administrative State at the Antonin Scalia Law School of George Mason University. She writes and teaches in the areas of administrative law, constitutional law, and the separation of powers. Jen previously served as a Deputy Assistant Attorney General within the Office of Legal Counsel and as an Associate Deputy Attorney General in the U.S. Justice Department.
If you’d like to learn more about Jen and all of our guests today, you can visit our website, RegProject.org, where we have all of their complete bios. In a moment, I’ll turn it over to Jen. Once our panel has completed their discussion, we’ll go to audience Q&A, so please think of the very difficult questions you’d like to stump them on. Audience questions can be submitted by using the raise hand function, and we will call on you directly.
With that, thank you very much to our panel. Jen, the floor is yours.
Prof. Jennifer Mascott: Well, thank you so much. It’s great to have everybody here this afternoon. Thanks to The Federalist Society for hosting this important conversation on the Supreme Court’s decision in June in the Arthrex litigation. Today, we’re going to focus on some of the implications for patent law as well as constitutional law. We have three very distinguished guests who are experts in both regulatory law but also specifically patent law.
We’re going to start with Professor Kristen Osenga. She’s the Austin E. Owen Research Scholar and Professor of Law at the University of Richmond School of Law and has written numerous law review articles on patent law and book chapters and op-eds on various aspects of patent law.
We also have with us Johnathan Stroud, an Adjunct Professor at the AU Washington College of Law, in addition to his full-time day job as Chief Intellectual Property Counsel at Unified Patents where he prepares, manages, and files litigation in unified patents IP work, and so has a wealth of expertise to bring to the discussion today.
And we also have with us Gary Lawson who is an Associate Dean and also the Philip S. Beck Professor of Law at Boston University College of Law and has written a casebook on administrative law and written numerous scholarly articles on administrative constitutional law and patent law.
We’re very pleased to have everybody with us today. What we’re going to do is start with some brief opening remarks from our panelists, give them each an opportunity then to respond to each other. I will then ask them a couple of questions, then we’ll turn it over to the audience for questions, so please be thinking of discussion points that you’d like us to follow up on as we move along this afternoon.
All right, Kristen, why don’t we start with you?
Prof. Kristen Osenga: Great. Thanks, Jennifer. I am going to tell you just a little bit about this case, in case you happen to not have been familiar with it, and after that, I’m going to talk to you about how weird patents are because today’s topic is patent exceptionalism, and also talk to you a little bit about the history of how courts have thought about whether or not patents are different.
The case itself started as a patent dispute and ended up being something entirely altogether different. Smith & Nephew and ArthroCare filed a petition for inter partes review for IPR of a patent that was owned by Arthrex. And the inter partes review procedure is part of the Leahy-Smith America Invents Act of 2011. It’s a quasi-judicial procedure in the Patent Office. A lot of details you don’t need to hear about, although I will recommend to you a Federalist Society Courthouse Steps that I moderated a month or two ago after this case came down if you want to know all the gory details about the opinion.
Anyway, so if one of these IPRs is instituted, a three-judge panel of administrative patent judges or PTAB judges or APJs, they conduct a review of the patent. After the panel, the board will issue a final written decision determining whether or not the patent stands or whether or not the challenge claims are then canceled. And then once the period of appeal has passed, the director issues a certificate that cancels any of the claims the board has deemed unpatentable. So the important people in this story are the APJs that look at the patentability of issued patents and the director, of course, of the Patent Office who then issues the certificate.
In the case that brought up this case, Smith & Nephew petitioned for an IPR. A three-judge panel of PTAB judges determined that a number of the claims were invalid and unpatentable. The board issued a final written decision.
And then Arthrex appealed to the Court of Appeals for the Federal Circuit, and they argued that the appointment of these PTAB judges who presided over the IPR were not constitutionally appointed in violation of the Appointments Clause of the Constitution. The PTAB judges are appointed by the Secretary of Commerce in consultation with the director of the Patent Office. And Arthrex argued that the PTAB judges, based on their authority and function, were principal officers and thus were unconstitutionally appointed.
The Federal Circuit agreed with this. They did hold that the APJs were principal officers. And to solve the dilemma of having the entire PTAB composed of improperly appointed people, the Federal Circuit severed the removal protection.
Then it goes to the Supreme Court. Not surprisingly, nobody was happy. The government, Smith & Nephew, and Arthrex all each petitioned for hearing en banc. Each filed a petition for cert at the Supreme Court.
End of the day, here’s what happened. The decision actually generated four separate opinions. Justice Roberts wrote for the majority, holding that the appointment of PTAB judges as inferior officers was incompatible with their authority. In the final part of the opinion — the joining of justices in this opinion is kind of crazy, but anyway, put that aside. In the final part of the opinion, Justice Roberts wrote that the Federal Circuit’s fix of removing their tenure wasn’t the solution, but instead decided that every decision must be reviewable but not reviewed by the director.
There are some dissents and some concurrences, and none of that’s really important unless one of the other gentlemen want to talk about it. What I want to spend the rest of my time talking about is patent exceptionalism, or at least some of the highlights about why patents and patent law are special. Obviously, patents are special. I’m a big fan of patents.
The Patent Office has been around since basically the early days of the country in one form or another, and that makes it one of the oldest agencies. But for a very long time, it didn’t really consider itself to be an agency, and the courts didn’t really treat it like an agency, and so they didn’t act like other agencies. The Patent Office predates the APA, which has led some scholars to argue that they shouldn’t even be bound by the APA. And more importantly, the Patent Office deals with patents, which are themselves very strange creations.
As noted in a Supreme Court opinion in Markman, patents are both like private contracts and public statutes but are entirely like neither. The Supreme Court in that opinion calls them mongrels or tertium quid. And as we’ve seen argued in more recent cases like Oil States, patents confer property rights that aren’t exactly like property but aren’t exactly like public grants. And although not everybody appreciates that characterization of patents, that also makes them a little weird.
Patents are prosecuted through the Patent Office by patent attorneys who have to pass a patent bar in addition to a state bar but also can be prosecuted by scientists who aren’t lawyers but do pass a patent bar. And patent attorneys are one of the few types of lawyers that are limited by many states in their ability to advertise themselves, along with, if I’m remembering right, admiralty, which also makes patents really weird.
The PTAB and its proceedings are weird. Patents are obtained after prosecution from the Patent Office but then can be taken away by the same agency that gave them in these post-grant proceedings. Basically, these IPRs and the other post-grant proceedings are the agency saying it screwed up with the original grant of the patent.
But despite this self-reflection, the massive number of Patent Office mistakes that the PTAB is correcting through these post-grant proceedings aren’t really being used to make the operation of the agency any better on its front end, nor is it being used to instruct applicants on how better to navigate the prosecution process. In fact, many of these PTAB decisions aren’t even precedential. That’s a whole other ball of wax. I’m not going to get into it.
On top of all this, patent appeals, whether from the courts or the Patent Office, go to the Federal Circuit. They have a special court, a special court instituted in large part to strengthen patent law. The existence of the Federal Circuit not only solidifies the fact that patents are special, but the Federal Circuit has often acted like patents are special, making up rules that only apply in patent contexts for things like standing, remedies, extraterritorial application of law, well established arenas of law, and many other places.
Patent exceptionalism, driven in part by the Federal Circuit, kind of flew under the radar for a long time. There’s probably a few other instances, but the first time serious attention was drawn to the fact that maybe patents and the Patent Office aren’t so special was the 1999 Supreme Court case of Dickinson v. Zurko. In that case, the Federal Circuit was applying the factual standard of review of clearly erroneous, which comes from court cases, to appeals from the Patent Office. The Supreme Court points to the APA and says, “No, the Patent Office is an agency, and as such, the Federal Circuit should apply the standard of whether the factual finding was supported by substantial evidence.”
And I remember being in law school during this time and thinking I really better pay attention to administrative law. It’s going to be super important as a patent attorney to understand administrative law. I haven’t used it since. I teach administrative law, but I don’t actually use it when I do patent law.
In more recent years, the importance of ad law has actually started being raised a little more often in patent cases. There’s the Tafas v. Dudas case of the late 2000s where the Federal Circuit used administrative law to state that the Patent Act conferred no substantive rulemaking power in the patent office but that the agency can go ahead and make procedural rules not in conflict with the Patent Act.
The AIA that I mentioned earlier that created the PTAB and updated the variety of these post-grant proceedings has raised even more administrative law questions for the Patent Office. In 2016, the Supreme Court decided Cuozzo Speed Technologies v. Lee. In that case, the Patent Office had set a standard for claim construction, the broadest reasonable interpretation or BRI standard that was supposed to be used in PTAB.
And the Court, looking at Section 316 of the Patent Act which grants the Patent Office the authority to issue regulations that govern IPRs, the Court decided that was sufficiently ambiguous to allow them to issue rules and that the rules that they issued were reasonable and could stand, so again bringing administrative law back into the world of patents, or maybe pushing patents back into the world of administrative law.
Anyway, in some respects, the lack of administrative law in the patent world makes a lot of sense. Patents are weird. Patents are special. Patents are my favorite thing in the entire world. But the Patent Act was not really drafted or meant to bring the Patent Office into what is now the modern administrative state. On the other hand, the Patent Office is an agency, and there’s a wealth of administrative law that’s been built up in so many other areas that could readily be applied to help people understand how the Patent Office should and maybe could work better.
And with that, I’m going to turn it over to Jonathan.
Prof. Jonathan Stroud: Yeah, that was great. I’ll start by saying that normally, the professor and I disagree on a fair number of things, but on this, I think we agree wholeheartedly.
It’s sort of undeniable that for at least 20 years, the Supreme Court just didn’t comment on whether the APA applied or whether the agency was subject to the APA’s substantial evidence standard. And then in 1999 when they finally did review what the Federal Circuit had been doing vis-à-vis the patent agency, the Supreme Court said, “Of course it applies. Of course all of these laws that apply to every other agency apply to you.”
But that was big news to the Federal Circuit and the patent bar. For the longest time, we’ve been acting like we are not subject to administrative law and that things are a little bit different. And that didn’t stop in 1999. That rolled into a number of decisions in the last 20 years where the Supreme Court has come back to the Federal Circuit and said, “You’re just like everybody else. Patents are just like everybody else.” It happened with injunctions. It happened with damages. It happened with exceptional case awards. And the common thing that the Supreme Court seems to keep being said is, “You’re not that special.”
So that was really interesting, in particular in light of the Dudas case that was just mentioned because basically what happened was — and I’m going to reveal my age and relative inexperience here. I was a patent examiner in 2007, and I had not yet taken the bar, but I was there when Director Dudas was there, and he issued this rules package. And it was really controversial. The rules were all sort of things that other jurisdictions do but that would have severely curtailed some of our practices before the board. They were all procedural, but it was like limiting the number of claims, limiting continuations. And he issued them as a rules package.
And that entire dispute rolled up to the Federal Circuit where the Federal Circuit judges at the time said, to the professor’s point, there is no substantive rulemaking authority in the Patent Act. The patent agency, even though it is probably the single biggest financial impact of any agency in terms of the number of choices and action that it issues every year — it issues over 400,000 patents a year. All of these patents can be used. Some of these patents are worth billions of dollars. It is the biggest agency, I think, by employee and by spent. It’s one of the only agencies that actually makes money. It’s net positive.
Even given all that, the Federal Circuit was holding on to this idea that the administrative law rules that all the other circuits and all of the other agencies were looking at didn’t apply. And that has still not been reviewed, technically, by the Supreme Court.
The toughest distinction is a little bit controversial because six years later, I think it was about five or six years later, although it was probably only four years after the decision in Cuozzo, which was the first of what I’ll call a string of cases that were very specific to administrative law, looking at what happened in the AIA, Justice Breyer in that opinion, almost as an aside in dicta, said, “Yeah, this is a substantive rule that we’re looking at,” when they were looking at the conferral of the claim construction standard in that case. Now, that has — it’s dicta. It was almost an aside.
But it’s like the Supreme Court didn’t even know that the agency was being treated differently and just assumed that of course it’s just like any other agency. And that led to, I think, a renewed interest in how the agency had been treated for a long time. The way that we do notice and comment rulemaking is different from other agencies. The way that we do administrative review is different. We’ve only been brought into line with the substantive standards in adjudicatory proceedings since 1999. We’re now not even completely sure about the type of deference that should be applied.
But what’s interesting about this is timing is everything. If 30 years ago the Supreme Court had stepped in and said to the Federal Circuit and to the patent administrative state, “You’re just like everybody else. All the same standards apply,” that would have made a really big difference in the rulemaking context for questions like deference, questions that have a lot to do with the freedom, the power that the administrative state was being given at the time.
Today, we obviously have a Supreme Court and, I would argue, kind of a broader judiciary that is a little bit more suspicious of the administrative state having power that is outside of the control of either the Article III courts or the president. And I think they’re a little bit more interested in reining that in.
So at the same time that patent law is being forced back to reckon with all these lines of cases that they had been ignoring on, like we said, standing and appointment power, on damages, on exceptional case law finding, evidentiary standards, all of these things, at that same time, the Supreme Court has been in parallel chipping away, and obviously the writing’s on the wall for all the deference cases, at least, and probably for other cases as well.
So you see a series of cases where the Patent Office and people asking for cert are being used almost as sort of a sandbox for the Supreme Court to look at specific areas of administrative law that they might have questions about. So you look at the Appointments Clause in Arthrex. You look at deference in SAS. You look at separation of powers in Oil States. And it’s almost like clockwork. Every few years, they’ve decided to grant, since 2012, a case reviewing the patent administrative state.
And so I agree with the professor that in terms of your actual practice, if you are not in Madison, if you are not in the management of the USPTO, you probably don’t end up using administrative law that much in patents. It’s almost like a lens with which you look at bigger questions.
But if you are the office itself and you’re entering into rulemaking, or you’re issuing guidance documents, or you are appealing some of the 600 cases that get appealed from the board, suddenly the Federal Circuit is very, very interested in the APA standards and in trying to interpret what the other circuits have been doing for 50 years in this area, 70 years in this area. And suddenly, you’re seeing a lot of issues where, at least in individual cases on appeal, it might make a difference. But it’s definitely something where we’re all coming to it very fresh.
I think the bigger practical impact of this is almost always when there’s a political problem with one of the rules that one of the directors or one of the agencies is creating, and then political pressure is brought to bear to try to get that rule not passed. So I’ll use an example. Director Lee had a rule about mandatory recordation. She put out notice and comment, and there were complaints, and it was withdrawn, and the complaints were from companies and stakeholders and all that.
Similarly, at the very end of Iancu administration, there was a rule on the Fintiv rules and some of the other discretionary denial rules that were proposed, and then in a really unusual move, rescinded at the last minute, I believe in October or November of the tail end of the administration, I think from political pressure, not from concerns over the way administrative law was going to be applied.
But I do think it counsels for the management of the Patent Office to take a closer look at how they treat their own rules and their own applications for rules and their own policy statements because for a long time, they’ve been able to fly under the radar. They don’t really have a full professional staff whose job is only to apply for these rules like the FDA does or like the EPA does, people who’ve been going through these challenges for years. And I think they can expect that that bell cannot be unrung, and that for years, people on all sides will consider the administrative law challenge to certain regulations or rules as something that is at least one arrow in the quiver.
And I think it’s likely that those don’t stop any time soon, and so I think it would behoove everybody to at least know about it at a high level because it’s going to be part of at least the cases that the Supreme Court hears and the cases that the Circuit hears for quite some time. So I think on that we agree. And I think the practical implications are, day to day, not that big of a deal, but will result in a fair number of challenges for sure.
And with that, I’ll turn it over as well to the separation of powers expert.
Prof. Gary Lawson: Thanks so much. And I do want to set the record straight on one thing. I am not by any stretch a patent expert. I know about as much about patents as I do about admiralty. The only reason I wrote an article about patents was that a few years ago, Adam Mossoff, who I think is in attendance here, called me up and said, “Look, you’re an ad law, con law guy. Take a look at the America Invents Act. I’m sure you’re going to find something in there that’s unconstitutional.” And of course, he was right. There’s plenty in there that’s unconstitutional.
So I’m not really here as a patent person. I’m here as the ad law, con law separation of powers person. And from that perspective, there was nothing at all exceptionalist about the opinion in Arthrex. It was exactly what we’ve come to expect from the Roberts Court and from Chief Justice Roberts in particular.
In my private moments, I call the Roberts Court the anti-ABBA. In 1974 in “Waterloo,” ABBA sang, “I feel like I win when I lose.” Well, when I read a Roberts Court opinion, I feel like I lose when I win. By any stretch, am I wrong, patent people, that Arthrex lost this case in every substantive way that matters? I assume their patent is toast after this. Someone can correct me on that. I can’t imagine that they’re actually going to come out of this with a valid patent. So they won the case, but they lost in every way that matters.
How did we come to this state of affairs? Well, let’s start with what went right. One of the many constitutional defects with the America Invents Act was that it rather flagrantly violated the Appointments Clause by allowing people to perform functions that could only be performed by people appointed by the president with the advice and consent of the Senate by people who were not so appointed. And you did get a majority of the Supreme Court to say that, a 5-4 majority, a bit surprising to me on that. This seemed like a fairly easy question.
Beyond that, though, things start to fall apart very quickly. Justice Thomas, a very strange dissenting opinion in this case, managed to ask all of the right questions that the majority didn’t ask, even if his answers were a bit peculiar. The majority never exactly explained why there was an Appointments Clause violation. There clearly is one, but they never articulated why that is.
And so we missed a huge opportunity to clarify something that has been unsettled and unsettling in the law of separation of powers ever since the Appointments Clause was reborn in 1976 in Buckley v. Valeo, and that’s this. The Constitution itself mentions two different kinds of federal officers but contemplates three. It mentions something called principal officers, but it mentions them only in connection with the Opinions Clause, and then later on with the 25th Amendment in a context that makes it clear that for any federal agency, there is one and only one principal officer in that agency. Maybe you could collectively treat the commissioners, a multi-level commission, the top of an agency, as the principal officer in that agency. But definitely, there’s just the top and then that’s it.
And there’s a mention of something called inferior officers in the Appointments Clause, a class of officers who, if Congress so wishes, can be appointed by the president alone, courts of law, or department heads. But that leaves unidentified but still substantively present all of those officers who are neither principal nor inferior. For lack of a better term, I would call them superior officers. That language was used on occasion at the Constitutional Convention. It was used in contradistinction to not just inferior officers but sometimes lesser officers or minute officers.
Basic idea is that you’ve got officers who are of some substance, and then you’ve got these officers who are not quite as important, and we can let them be appointed in this other fashion. And that terminology somehow disappeared in 1976 in Buckley v. Valeo where the Court used the term principal officers to describe everything that isn’t an inferior office.
And that simple terminological miscue has skewed the law ever since. It leads to the utterly ridiculous position that in, for example, the Department of Justice, the only principal officer would be the attorney general. Does that mean the deputy attorney general, solicitor general, all the assistant attorneys general, all the U.S. attorneys, are inferior officers? Well, that can’t possibly be the case. So it would have been nice to get some clarification on that.
And where Justice Thomas recognized the issue, where he got it wrong, was by not recognizing that terms like inferior and the unstated superior describe something. Somebody is superior for a reason, or, as it turns out, multiple reasons. You can be superior because you don’t answer to somebody else. That’s certainly one reason why you would be a superior officer.
You can also be a superior officer even if you answer to somebody else because you’ve got a freaking lot of power. The reason why the solicitor general of the United States is a superior officer, even though the attorney general can overturn anything the solicitor general says, is because the solicitor general is freaking powerful. Federal courts of appeals judges are superior officers even though they can be overruled by the Supreme Court because they’re very, very powerful folks. So it would have been nice to get that kind of clarification for the future about what exactly it is that created the constitutional problem in this case.
But the real puzzler of this case is after finding that, yes, Arthrex, the decision against you was made by people who do not have the authority to make the decision, what happens? Well, Chief Justice Roberts rewrites the statute. He seems to like rewriting statutes. I’m not quite sure why he finds that such an interesting thing to do, but he does it on some fair occasion.
You’ve got a Coasean problem here. The reason why this scheme is unconstitutional is not because the members of the PTAB don’t answer to anybody. It’s because they don’t answer to anybody, and they are also capable of canceling people’s patents that can then only be overturned by an Article III court. It’s the combination of the two.
There would be no problem if they didn’t answer to anybody if they couldn’t cancel people’s patents. There would be no problem with them being able — well, there would be a huge problem with them being able to cancel people’s patents because, in my humble view, only an Article III court is constitutionally able to cancel someone’s patent. But that’s a whole different panel. So it’s the combination of these.
The Supreme Court decided in its wisdom that it was going to take part of that Coasean problem, namely the cancellation of patents, and leave that one alone. And it was going to take the statutory scheme which made it very clear that, no, nobody within the executive department can review the decisions of the PTAB and say, “Well, we’re going to let somebody review the decisions of the PTAB.” And that just is a very, very strange, strange reason.
But there’s nothing exceptionalist about it. It wasn’t because this was the PTO. It wasn’t because this was a patent case. This is something that we have come to expect on a fairly routine basis from the Roberts Court. I don’t have an explanation for why they do things that way. I simply observe that it’s not anything that we haven’t seen in lots of other public law contexts.
And with that, I think we should proceed to discussion.
Prof. Jennifer Mascott: Thank you all very much for setting the table there for us and helping us understand a little bit the decision from the patent perspective and also the constitutional perspective.
I’m going to first ask an open-ended question, just if any of the panelists have a desire to respond themselves to a particular point that anybody else made, and then proceed to questions of my own. So just first, in an open-ended way, does anybody have a particular — it sounds like there’s a fair amount of agreement but also some differences in terms of your focal points of the opinion. So I see Gary raised his hand, so I’ll start with Gary.
Prof. Gary Lawson: Well, I have — it’s really a question—I don’t know the answer—for the patent people, and that is how much of the resistance to bringing the patent world into the larger world of administrative law comes from the selection process for the Federal Circuit, because my understanding has always been that judges on the Federal Circuit are picked. Other circuits, you’re negotiating with the Senators for this, and you’re getting the home state that, but you’re only getting generals.
My understanding is that the Federal Circuit is a different world in terms of the selection process. How much of what we’ve seen over the last three plus decades is a result of the inbreeding that goes into the ongoing composition of the Federal Circuit?
Prof. Jonathan Stroud: Not to make it a controversial term, right? So I’ll say something briefly, and then I’ll let the real professor answer.
But I would say that my understanding of the process, and it changes from administration to administration, but you’re right that it is generally less political because there — some circuits have an entire committee that you have to vet everything through that committee. My understanding is that the Fifth Circuit has like a committee of local people that are interested, that you have to vet them through that committee. And others have — the D.C. Circuit obviously is a feeder to the Supreme Court. But the Federal Circuit obviously is not — both more and less attention is given to it, and it all goes through the Office of White House Counsel.
So generally, it’s just a historical thing. I don’t think it’s a rule, and I don’t think anyone would freak out if it was violated. But generally, it’s kind of like an every other rule where there’ll be one generalist that’s put on the court, or someone that’s not patents that’s into trade law, or one of the other areas, because obviously the Federal Circuit isn’t just patents. It’s other areas of law too. And then it’ll be someone who has history in the patent bar. But they don’t have to do that.
And I think to your point, there’s — I think it’s inevitable that there’s a certain amount of everybody talks to everybody, and then there’s a sort of group think, and everybody convinces themselves that they’re right about something or that they’re successful or that they have the expertise. And they do, frankly. They have the expertise.
But you start to hear people say in conversation, “We’re the Supreme Court of patents,” or “We need to make such specific rules because this is such a special area of the bar.” And it starts to bleed into what I think is a bell that now can’t be unrung where the Supreme Court got wind of this idea that the patent bar and the Federal Circuit thought it was special. And it was definitely a visible back-and-forth between former Chief Rader and the Supreme Court in the Alice — the 101 arguments where there was a number of cases, and then there were some GVRs that came back that were decided the same way, and then you had the Chief issuing these additional views about 101.
And I frankly think that some of the older justices on the Supreme Court now just have the sense that what you’re saying is right even if it’s not. I’m not saying that it is true. I think the judges on the Federal Circuit are brilliant and they know what they’re doing. And a lot of times, the patent-specific rules they’re issuing are frankly better than the rules that are more generalist or more broad or that aren’t predictable. But I think more importantly, practically, there’s a sense of what you’re saying at the Supreme Court that that’s true, for what it’s worth.
Prof. Jennifer Mascott: Kristen, did you have something to add?
Prof. Kirsten Osenga: Just briefly, in some respects, because the Federal Circuit is composed differently than some of the circuit courts, you might expect them to be more willing to accept some of the administrative law stuff. Some of the judges on the Federal Circuit have come from agencies, and so you would expect them to be a little better with the APA than otherwise.
But on the flip side of that, then, I often tell my students that the Federal Circuit applies the law of the circuit unless it involves patent law. And the Federal Circuit has been very willing to make anything patent law so they can make their own rules. So what they should and can do and what they want to do don’t necessarily match.
Prof. Jonathan Stroud: So I had one thing to add. I’m sorry. And this is more of a broader thing, but the bar talks about administrative law a lot recently like it’s an entirely separate area of the law, and it is. But the way I learned it in law school and the way that it’s being treated now, this is a bad analogy maybe, but it’s kind of like cranberry juice. Cranberry juice gets put into all the other juices as a filler. It’s like cran-apple, cran-raspberry, but it’s rarely on its own.
When you look at patent law and administrative issues that pop up, they’re really constitutional issues. The Appointments Clause issue is a constitutional issue. The level of review and notice and comment is really a constitutional issue. The separation of powers is really a constitutional issue. And so they’re seen through the lens of administrative law, but they’re not really at core anything different than the constitutional questions as applied to the administrative state and the separation of powers issues that come from that. The only one that’s truly administrative is deference, and that’s something that we haven’t really talked about and is a little bit less important at this stage.
Prof. Jennifer Mascott: Well, I think administrative law, like perhaps other areas of law, already has a statutory component to it with the Administrative Procedure Act that’s general and broad based and other things, and then it also has constitutional things. But I think that does dovetail into a point that seemed to come out or a question I wanted to ask you all to follow up on the discussion of patent law exceptionalism. Is there a sense in maybe that concept is worth speaking about it too broadly?
So at least when Kristen started off and then, Jonathan, you followed, some of the exceptionalism we were talking about was born out of a lot of the technical expertise that’s required. You have to know science to be able to determine if a patent is going to be dealing with something that’s already — requested for something that’s already obvious, is it novel, all of these things. And is it possible that maybe there are reasons for exceptionalism or specialty there just like there could be special aspects to FCC law or APA law, but that perhaps maybe the same justifications are not present for exceptionalism in some of the constitutional areas, or at least I think that’s my question I’m going to put to all of you.
Is there anything historically about patents that means they should be treated in a separate fashion for purposes of executive branch supervision, judicial review, those kinds of things, from other areas of the law? And I could see, yes, no, maybe in some cases, but open that up to you all because I think — and actually, specifically, keep in mind the Arthrex decision since we’re here today because Arthrex is dealing with executive supervision, Appointments Clause. And I don’t know that I’ve heard anything yet about how patents are different in a way that would suggest they should have received exceptional treatment for purposes of Appointments Clause and executive supervision, but maybe you all can bring that out.
Prof. Kristen Osenga: I’ll start. I’m not sure I’m going to answer your question exactly the way you wanted it answered, Jennifer. Sorry. So in some respects, patent law does have a wee bit of that exceptionalism because of expertise that we expect from agencies in that patents that are issued by the Patent Office are presumed to be valid, that the scientists who do the examination are assumed to have done it correctly. And so there’s a legal presumption that every patent that comes out of the Patent Office is valid. So that would seem to align with the idea of deference and agency expertise with respect to the science.
And then we have the PTAB who’s in the exact same agency flipping them over. And so that’s what really bothers me the most about this idea of the agency expertise is the one hand giveth and the other hand taketh away, and both hands are in the same person. And so then you wonder, well, what’s the point of the expertise on the front end? What’s the point of the deference to the agency if the agency can then say, “Oops, sorry. We screwed up.”?
Prof. Jonathan Stroud: So I agree with some aspects of that. To answer your question with an example where I think patent exceptionalism was warranted and wasn’t given credit, maybe because of what I would characterize as a political dispute between the Supreme Court and the Circuit over 101, was if you read the concurrence that now Chief Judge Moore wrote in Myriad, it is an extremely well thought out concurrence about 101 eligibility based entirely on the science, and it is very detailed.
And I remember reading that in law school and thinking she’s right. This is a complicated thing, but she’s explained it in a way that it makes sense to me. And then you read what happened in Myriad above, and if you know — I don’t know that much. But if you know anything about the underlying science to it, there were a lot of people that some of what was written, it kind of grates the wrong way because there are certain things about the natural law exception that just don’t make a lot of sense when you break it down at the chemical level.
And so I really appreciated that as an example of what I thought was a place where we should have deferred to the Federal Circuit’s technical expertise or the patent bar’s technical expertise and didn’t, maybe because of this long-term trend against patent exceptionalism. But there are examples like that where because what they’re doing is so specific to the technology, they should be treated separately.
And then, frankly, I don’t think that will be the case for some time, at least vis-à-vis the review of the Supreme Court and the Federal Circuit, and maybe even the Federal Circuit in terms of the agency. But you do see that in the substantial evidence reviews. The Federal Circuit, when they review the board, they review them for substantial evidence of the APA. And they oftentimes defer to their factual findings. And so a big part of that is actually already baked into the APA. But I do agree there are times when that exceptionalism is merited, frankly.
Prof. Gary Lawson: I’ll just throw this in. If Congress wants to, Congress anytime can take the PTO out of the APA. It’d simply pass a set of statutes prescribing a unique set of procedures, including a unique set of standards for judicial review for the PTO. Nothing prevents that from happening. The empirical question is whether that has, in fact, happened.
From a constitutional standpoint, from the standpoint of separation of powers, I’m going to make a bold statement and then qualify it a bit. The bold statement is that the Constitution’s separation of powers rules are all, in general, trans-substantive; that is, they don’t distinguish among functions or agencies.
The one context where that might not be true to the same extent, and this would be a whole separate panel, is possibly with regard to the sub-delegation doctrine. That is something that might vary from power to power, and hence, the Intellectual Property Clause is its own distinct power. It’s not impossible that one could make an argument that would apply a sub-delegation doctrine a little bit differently for that power.
But in terms of the kinds of things that are at issue in Arthrex, executive control, Appointments Clause, the power or lack of power of federal courts to rewrite congressional statutes, I don’t think there’s anything distinctive about patents, the PTO, or any other agency.
Prof. Jennifer Mascott: Great. So I have another question or two. That’s great. Thank you all very much for that. Another question or two, and then we’ll see — we have some audience questions that we can go to.
But since we, again, are talking about Arthrex and, I guess, the impact of it a little bit for patent law exceptionalism, I am also wondering if you all can speak a little bit just to the practical day in and day out impact. And we haven’t talked a lot about, actually, I think, what the opinion — we’ve talked about what the opinion thinks was wrong in the current structure. We haven’t talked a lot about what it’s going to look like moving forward.
But I think in a nutshell, we’re right. Essentially, what the Chief’s opinion said is, well, generally the relevant statutes give the director the power to oversee the Patent Office. And this one other provision here suggests, though, that the PTAB can stand alone and have essentially the final word in certain decisions within the Patent Office because that is unconstitutional for people who are not principal officers to have that much unreviewable authority. We need to essentially read the statute to allow the director to oversee that.
But there’s no — obviously, even though the Chief is interpreting the statutes in a certain way, he’s not actually in Congress writing new instructions for what that’s supposed to look like. So as a practical matter, is the director — everything’s fine, so long as the director believes he or she can reverse decisions, but maybe he or she won’t? Does the director now have to do something particular in reviewing all of these board decisions to make sure that they’re getting adequate supervision? For the patent law folks and the con law expert, what do we think, and what do we know this is going to now look like moving forward? Gary, why don’t you take it?
Prof. Gary Lawson: This is exactly the question that we would have had maybe some glimmer of answers to if the Court had addressed those kinds of questions up front. Go back to my Department of Justice example. The attorney general supervises the solicitor general. Does that mean the solicitor general is an inferior officer? Well, the answer is no because someone can be a superior officer not because they issue the final word but because they just have a whole lot of power.
Then the question would be, okay, suppose PTAB judges are now no longer the final word because the director could, just like the attorney general can override the solicitor general, the director can override the PTAB. PTAB judges still have the power to cancel patents. Is that sufficient quantum of power to make them superior officers, regardless of where they are located in the internal hierarchy? And Justice Thomas, to his credit, in his, as I said, otherwise strange dissent, raised the question of whether location in a decisional hierarchy is the sole consideration to determine whether someone is inferior or not.
For a whole variety of reasons that would take a long time to explain, I don’t think so. I think you can be a superior officer either because you’re the final word or because you have a whole lot of power. PTAB judges are superior under both criteria. Pick one. So for me, no, I don’t think the Roberts fix actually solves the problem. I think they’re still superior officers, but doctrinally, obviously, the Court thinks otherwise.
How that’s going to play out, not just in this case, but in other cases that might come up, well, let’s come back in ten years and see where we are. But that’s exactly the question. That’s exactly the problem that the Arthrex decision poses but chooses not to address.
Prof. Jennifer Mascott: Jonathan?
Prof. Jonathan Stroud: Yeah, I kind of think this is the perfect analogy or the perfect question for this panel and for the way that it’s characterized because I think the first half of the opinion, which was about the Appointments Clause and what makes someone superior versus inferior, has way more ramifications for the entire administrative state and for everyone else. And I agree with you that that part of it was very unclear for the reasons that were pointed out in the dissent. He did not say what makes you a superior or an inferior officer, all that.
In the fix, in the remedy that he provided, the Chief provided, the second part of the opinion, though, it’s specific to patents and specific to this particular violation. He was incredibly specific to a level that I was kind of shocked that they got down to the level of detail of how the remands would be handled, or how the remand in this case would be handled, which, frankly, from someone who practices at the bar, was very welcome.
The Chief writing and recognizing that the impact on the system itself is going to be severe and I need to be clear about how the fix would work in this particular case was very welcome. And he was extremely clear. And obviously I think that if you’re the Chief and you say something is constitutional, it’s kind of hard to argue that it’s not.
But I very much agree with you that the opinion is not a model of clarity, and I think there’s a lot of questions on the Appointments Clause still about how you apply it to any other agency or any other decision maker, maybe even these decision makers themselves. But it ensures that the actual fix for the problem that was highlighted here, it was very specific, even down to naming the acting director, as someone in the comments said, in the opinion itself, which you have to give it up to the Chief for being a practical-minded person. He wanted to make sure that this did the least amount of disruption if it was going to be implemented that way, is at least my opinion or my read of the way the opinion was written.
Prof. Jennifer Mascott: Kristen, did you have anything you wanted to add?
Prof. Kristen Osenga: Just quickly, in theory, it puts a lot of power into a person who has not yet been named by this administration. We are still — and I don’t like to correct Jonathan because — okay, we mostly disagree on almost everything except today.
But Hirshfeld, fantastic guy, is not even an acting director. He’s a dude performing the duties of the director, which in some arguments, people are saying, well, if he’s not even the acting director, he can’t do any of this because there’s — I don’t know. I’m not a constitutional law expert. I will let Gary answer that part of it, if there really is a difference in — that means Hirshfeld shouldn’t be doing anything. So it put s a lot of political power into the hands of this director who has yet to be named.
But I think as a practical matter, and kind of what we’re seeing just in the very early stages, they’re just saying, “Nope.” Hirshfeld at the beginning of August just said, “Nope, not going to look at these. Not going to look at these.” So the decision says they’re reviewable, not required to be reviewed. And so if the director or the person acting as the director or the acting director, whatever you want to call it, if they just say no, then it doesn’t really change anything. And it would seem that the level of workload that it would impose on the director, I’m guessing a lot of times, it’s not going to have any practical difference.
Prof. Jonathan Stroud: I agree with that. I think, practically, maybe one percent or less of these cases get looked at. But it’s not going to stop people from asking. It’s not going to stop people from briefing it. And it will impose a cost on someone, both the parties and the administration. But I agree with your assessment of the likelihood of reversal in most of these cases.
Prof. Jennifer Mascott: I have one question, and I guess this is principally just for the focus that Gary’s brought to the case but would be interested if anybody has something to say. But Gary, to get to the tension that you brought up several times between the Chief’s opinion and Justice Thomas asking questions, I’d be interested in hearing more your thoughts or evidence or how you unpack the extra importance that goes along with being a superior officer and sort of driving here’s the method to my madness.
So if one is thinking about separation of powers and the unitary executive theory, it would seem as though the president is most in charge and has the most power to supervise, if he principally is able to maintain charge by directing or reversing decisions within the executive branch, and that once he does so, in a sense, at least just in the common use of the term and theory or anybody who has to be subject to that direction underneath the top person in a department is in theory or in a sense, even though the solicitor general’s superior to everybody in his department, or he might be superior in the sense that he does important things, and that also, the fewer people who are actually subject to appointment with Senate consent, the more control the president has in a sense.
And so to believe that people have to be subject to Senate consent, you’re looking at a constitutional command. And so we want to make sure how broad that is. So when you’ve looked historically, what have you seen in the evidence that suggests that it’s a constitutional necessity that more than just the top person in a department be considered a principal or a superior officer?
Prof. Gary Lawson: Well, I am less inclined than a lot of people in this business to look at the early practices of early congresses and presidents for a whole variety of reasons, the main one being that literally the very first statute enacted by the very first Congress, one stat one, flagrantly unconstitutional, was pointed out to them that it was flagrantly unconstitutional by no less than Elbridge Gerry, and, ah, screw that, they did it anyway. So I am not inclined to look at practices of early congresses and early presidents.
What I do see is a clause, the Appointments Clause, that proscribes a mode of appointment for officers of the United States and then says, yeah, but the inferior ones, we can do this with. That is certainly a strong indication that the main officers, the bulk of the people who you’re talking about in this clause, are not the inferior officers. They’re the sideshow. They’re the afterthought. They’re the leftovers.
To the extent that one wants to look at history, if one looks at whatever records there are in the Convention, virtually every word that is spoken about the Appointments Clause is about officers who were appointed by the president with the advice and consent of the Senate, to the extent that one considers that sort of thing relevant. But I would focus primarily on the way the clause is written. It seems fairly evident that your basic default understanding is people who are officers are presidential appointees with Senate advice and consent.
Prof. Jennifer Mascott: Yeah. So I guess it’s — yeah, it’s hard to know. They threw it in so much at the last minute. On one hand, that could suggest that it is a minor afterthought. On the other hand, they didn’t have another part of the clause to be talking about before. But yeah, I get your point about structure and text there.
Kristin and Jonathan, did you all have anything to add on that? That was purely con law, I think. But anything else that you want to make sure we cover before we — in our last few minutes here? I see one raised hand that I want to turn to, but anything you want to clarify from earlier?
Prof. Jonathan Stroud: I just want to apologize for my horrible analogy about cranberry.
Prof. Jennifer Mascott: No, no. That was — analogies are good. Word pictures are good. So I see Ron Katznelson had a hand raised.
Ron Katznelson: Do you hear me now?
Prof. Jennifer Mascott: Yep.
Ron Katznelson: Yeah. A question for maybe Gary but to others too. I’ve heard very little in this discussion today about what it means in terms of the administrative state, administrative action by the PTO, given the requirement that there’ll be a review. For example, this summary dismissal of request for review seems to violate the APA. The agency must give reasons why they’re dismissing it. There were no reasons given.
So do you perceive the command to demand a review, a simple ability to dismiss it like a Rule 36 dismissal, or should the agency provide reason for that dismissal? That would give more meaning to the supervisory role of the director. That’s number one.
Number two, the statute also calls for the director, who is a principal officer, to decide an institution. Shouldn’t the review of that institution decision also be available under Arthrex?
Prof. Gary Lawson: Well, I’m happy to take the first part of that question, which is a great one. Administrative law is a strange field. The last half century has seen judicial interpretations of the APA that have taken whole rafts of provisions in the 1946 statute and construed them to be unrecognizable to their drafters, almost all of those constructions adding on heaps and gobs of procedures that one could not plausibly attribute to the language of the statute.
The one provision that seems to have escaped all of that is Section 555, which is the provision that says you’re entitled to a statement of reasons when an agency denies something to you. There’s no real good explanation for why that particular provision of all the provisions in the APA hasn’t metastasized into something very, very large.
So all I can say is that as administrative law stands right now, that obligation to give reasons is essentially pro forma, but there’s nothing in the DNA of modern administrative law that requires that or would even suggest it. So if you’re looking for something to litigate, I would say go for it. But the doctrine as of this moment in time does not sustain anything other than a pro forma statement of reasons for denial. And you don’t even have to give the pro forma statement if the reason is a problem.
Prof. Jonathan Stroud: I don’t know if Ron’s directly associated with the case and that’s why he asked this, but there is a case that was brought a week ago or so by a pharmaceutical company. And the second issue — it was in Virginia. It was a facial challenge. And the second issue — it was a Fintiv challenge. They challenged the Fintiv rule. I can’t remember. I think it was AstraZeneca. But the second issue they raised was this exact issue. So I’m not going to comment on it because it’s a live issue. I don’t know if, Ron, you’re involved in that case, but basically, there are people that are currently using this as — arguing that the director should also have the ability to review denials, at least of institutions.
Prof. Jennifer Mascott: Nate, do we have time for a question from one of our organizers before we go, Adam Mossoff?
Nate Kaczmarek: Adam just indicated by chat that he will withdraw and respect the —
Prof. Jennifer Mascott: — I see. Okay. All right. Great.
Nate Kaczmarek: Any other concluding remarks from the panel or from Jen?
Prof. Kristen Osenga: Can I just say this is the first time I’ve been on a panel where both ABBA and cranberry juice were referenced? And I am so delighted, and I’m so grateful for Jonathan and Gary participating.
Prof. Gary Lawson: Thank you all for having me.
Prof. Jonathan Stroud: Yeah, very much agree. Thank you all.
Prof. Jennifer Mascott: Thank you all for bringing your expertise. This was a wonderful discussion.
Nate Kaczmarek: Totally agree. Our thanks to Gary, Kristen, Jonathan, and Jen. We look forward to having the benefit of your expertise again soon. We welcome feedback by email at [email protected] Thanks everyone. Have a wonderful day.
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Philip S. Beck Professor of Law
Boston University School of Law
Austin E. Owen Research Scholar & Professor of Law
University of Richmond School of Law
Chief IP Counsel
Assistant Professor of Law and Co-Executive Director
C. Boyden Gray Center for the Study of the Administrative State, Antonin Scalia Law School