The IP Bar Weighs in on CAFC Denial of Arthrex Rehearing

Yesterday, the U.S. Court of Appeals for the Federal Circuit denied rehearing en banc in Arthrex v. Smith & Nephew. Five of the 12 Federal Circuit judges wrote separately to explain their reasons for denying, or dissenting from denial on, rehearing. IPWatchdog Founder and CEO Gene Quinn said the order reveals a chaotic and disorganized court. “This court has horribly failed the industry by refusing to agree on anything,” Quinn said. “For a court that claims to be so overworked that it must dispose of literally half of its docket with one-sentence Rule 36 summary affirmances, spending so much time and energy across 58 pages of completely meaningless analysis and disagreement goes beyond unconscionable.”

Judge Randall Rader also weighed in yesterday, pointing out that the split among the judges may at least prompt Congress to step in. “The current judicial squabble over Arthrex and its implications may at least have the virtue of prompting Congressional review on the impact of the PTAB on national innovation policy,” Rader said.

Below are some additional reactions from IP experts, most of whom agree the Supreme Court will weigh in next.

“The split among the judges provides a roadmap for a probable Supreme Court grant of a petition for certiorari to resolve the constitutionality of the appointment of PTAB judges to decide AIA trial cases.

The grounds for dissent define a roadmap of the points to be teed up for Supreme Court review. The key arguments are summarized as follows: Title 5’s protections for government employees are desirable and should not be eliminated without Congressional authorization. The USPTO can fix the problem by use of a statutory authorized panel (i.e., the Director, the Deputy Director, and the Commissioner of Patents). Prospective application of the remedy only is wrong.  Retroactive application of Arthrex remedies the harm caused by the violation of the Appointments Clause. The original panel’s conclusion that PTAB judges are principal officers is highly questionable. The APJs are really inferior officers because the Director has substantial power over the PTAB, such as ‘to issue binding policy guidance, institute and reconsider institution, personally choose which APJs sit on AIA trials panels, single-handedly designate or de-designate any final written decision as precedential, and convene a panel of three or more members of his choosing to consider rehearing any Board decision’ and the ‘ability to discipline or remove APJs in a constitutionally significant manner.’”

“The Federal Circuit’s denial today (March 23, 2020) of a rehearing en banc in Arthrex v. Smith & Nephew, should be kept in proper perspective, as it is just one more hurdle that needs to be surmounted before this Constitutional issue reaches the Supreme Court.  As we have frequently seen, the Supreme Court often decides patent questions using broad policy brush strokes.  The underlying policy goal by the Supreme Court is likely going to be some route towards preserving the IPR process and curing any Constitutional deficiencies in the original appointment of the present APJs. Only time will tell.”

Michael Specht, Sterne, Kessler, Goldstein & Fox 

“While there is clearly much tension surrounding this issue at the Federal Circuit, overall the Court seeks to minimize disruption at the PTAB which is sorely needed right now.  We will wait and see what the Supreme Court has to say.  In the meantime, it is largely business as usual.”

“The denial of rehearing en banc in Arthrex, as expected by the Circuit’s remand practice to date, shows a majority of the active judges appear more concerned with the practical implications of that decision (and minimizing actual disruption) than they do with addressing speculative legislative and regulatory changes or perceived Circuit splits.  The first concurrence does a good job of limiting the practical effect of the ruling, clarifying procedural considerations, and endorsing the narrow fix that the Arthrex panel employed.  While not the only possible fix, it seems clear that the panel had the authority to enact it, and we’re encouraged by the first concurrence’s attempts to answer some of the few nagging questions about panel constitution on rehearing and when the issue has been resolved or is otherwise waved.  For instance, the lead concurrence reinforcing again that briefing on remand is not required should further minimize the wasting of unnecessary administrative resources.

It’s also heartening that judges Prost, Lourie, Taranto, and Stoll showed admirable restraint here, and that the remaining opinions were restrained and respectful in their disagreements on remedy.  While there are (as always with patent law) an endless number of rabbit-hole sub-issues raised, such as timing (footnote 18 of the first dissent), waiver/forfeiture and prudential standing (most of the lead concurrence and some of the second), and severance (the lead concurrence), in the end, there doesn’t seem to be all that much disagreement on whether the panel could or should have addressed things as they did.  This denial (per the lead concurrence) should result in minimal procedural disruption in the less than 80 appeals at issue in these already trying times.  It hasn’t disrupted our own processes or filings, other than delaying closure or final appeals in a handful of stragglers. While I suspect many (on all sides) would like to debate it endlessly, I for one would prefer this chapter closed so that companies, the Court, and the agency can continue with their hard, serious work.”

Eileen McDermott

Eileen McDermott is the Editor-in-Chief of IPWatchdog.com. Eileen is a veteran IP and legal journalist, and no stranger to the intellectual property world, having held editorial and managerial positions at several publications and industry organizations. She has acted as editorial consultant for the International Trademark Association (INTA), chiefly overseeing the editorial process for the Association’s twice-monthly newsletter, the INTA Bulletin. Eileen has also served as a freelance editor for the World Intellectual Property Organization (WIPO); as senior consulting editor for the Intellectual Property Owners Association (IPO) from 2015 to 2017; as Managing Editor and Editor-in-Chief at INTA from 2013 to 2016; and was Americas Editor for Managing Intellectual Property magazine from 2007 to 2013.

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