By Tom Engellenner
The Federal Circuit heard a steady stream of cases from the Patent Trial and Appeal Board (PTAB) in 2019 as appeals of PTAB final written decisions seem to have become de rigueur.  PTAB appeals are now the largest single component of the Federal Circuit docket with over 600 appeals docketed in FY2019 – almost double the number of appeals that the Federal Circuit received from District Court patent decisions.

Perhaps the most noteworthy Federal Circuit decision of 2019 came in Arthrex v. Smith & Nephew No. 2018-2140 (Fed. Cir. Oct. 31, 2019) where a Federal Circuit panel ruled that the way administrative patent judges (APJs) are appointed to the PTAB was unconstitutional and vacated the decision with a remand that the case be heard again by another PTAB panel.  The decision purportedly cures this problem going forward by severing a portion of the enabling legislation that prevents the administrative judges from being fired except for cause. The Arthrex decision appears to give everyone similarly situated the right to request a remand and rehearing before a different panel.  About 100 or less pending appeals appear to fall in this category.

On December 16, all of the parties to the Arthrex case sought en banc reconsideration of the case.  Smith & Nephew and the USPTO’s solicitor general argued that the appointments clause issue and, hence, unconstitutionality was wrongly decided by the Arthrex panel because APJ’s were not “superior officers” (requiring Senate confirmation).  Arthrex and the government argued that the Director of the USPTO has sufficient control over the PTAB judges, pointing out that the Director can assign APJs to particular matters, remove them from cases, and over-rule institution decisions by issuing sua sponte dismissals.  Arthrex’s en banc rehearing petition, on the other hand, argued that the decision didn’t go far enough and the proper remedy should have been to throw out all decisions rendered in AIA trials so far.  A decision on the en banc rehearing request is unlikely to made until February 2020. If the rehearing petition is granted, an actual en banc decision may not come until 2021.

Another noteworthy Federal Circuit decision came in June, 2019 in Regents of University of Minnesota v. LSI Corporation, No. 18-1559 (Fed. Cir. 2019), where the Federal Circuit made it clear that sovereign immunity does not apply to patent challenges brought pursuant to the 2011 America Invents Act (AIA), regardless of whether the immunity claim is raised by a Native American tribe or a state university trying to avoid patent adjudication.

The University of Minnesota case was a consolidated appeal to the Federal Circuit of several PTAB decisions invalidating University of Minnesota patents.  The university’s defenses at trial included an assertion that the State of Minnesota was a sovereign entity and could not be forced into a federal administrative trial without its consent.

The University of Minnesota decision by the Federal Circuit emphasized three reasons for refusing to recognize sovereign immunity in IPR proceedings.  First, the Federal Circuit found that the USPTO Director, a politically appointed executive branch official, not the private party, is the decision-maker who ultimately decides whether to proceed against the state university. Second, if an IPR is initiated, the USPTO can choose to continue review even if the petitioner chooses not to participate, thus reinforcing the view that an IPR proceeding is an act by a federal agency reconsidering its own grant of a public franchise.  Third, IPR procedures differ substantially from the Federal Rules of Civil Procedure, which govern ordinary civil litigation.  For example, in an IPR, there is essentially no opportunity for a petitioner to amend its grounds for challenging the patent after the initial petition is filed and discovery, e.g., by written interrogatories or by requests for production of documents, is very limited.

All three Federal Circuit judges on the panel  joined in the University of Minnesota opinion.  In addition, the entire panel joined in a separate “additional views” concurring opinions, in which they stated that they also believed that post-grant administrative proceedings such as IPR proceedings were in rem proceedings, in which sovereign immunity does not apply.

The issue of sovereign immunity is not quite dead yet.  The University of Minnesota filed a petition for certiorari on September 19, 2019 and the Supreme Court could possible take up the case this term.

Additionally, the Federal Circuit’s ambivalence over when it can review a PTAB “institution” decisions may soon get resolved.  Very early in the history of AIA trials, the Federal Circuit held in re Cuozzo Speed Technologies, 793 F.3d 1268 (July 8, 2015) that the American Invents Act made decisions on whether or not institute a trial non-reviewable except where the PTAB clearly acted outside of its authority or engages in other “shenanigans.”  A year later, the Supreme Court affirmed the Cuozzo decision but shed little more light on what constituted an exception to the “non-reviewable of institution decisions” rule.

Now, the Supreme Court has decided to take up the Dex Media v. Click-to-Call, Inc. case to resolve whether a “time bar” decision by The PTAB properly falls within the class of exceptions where Federal Circuit review is appropriate.