Eleven months ago the Federal Circuit held that the Administrative Patent Judges who serve on the Patent Trial and Appeal Board, were unconstitutionally appointed because they act as “principal officers” within the meaning of the Constitution but were not appointed with the advice and consent of the Senate as required by the Appointments Clause. The court adopted a narrow “remedial approach” in which it “sever[ed] any problematic portions [of the statute] while leaving the remainder intact.” The court thus invalidated Title 5’s removal restrictions, as applied to these administrative patent judges. , See 35 U.S.C. § 3(c). Because the APJs can be removed without cause, the court concluded that, going forward they were inferior as opposed to principal officers. It has remanded scores of cases to the PTAB for reconsideration by a new panel of APJs.
All parties have sought certiorari. The government argues that there was no Appointments Clause violation at all, and regardless that no remands were required. The patent owner argues that the Federal Circuit did not go far enough, and that there is no remedy for the purported Appointments Clause violation here. And some are of the view that the Federal Circuit got it just right. As the Supreme Court turns to its October 2020 Term, it will decide whether to take up this issue, following on decisions such as Lucia v. SEC and Financial Oversight & Management Board for Puerto Rico v. Aurelius.
The stakes are high. Left unaltered, the Federal Circuit’s decision will lead to do-overs for potentially hundreds of invalidated patents. And if the patent owners’ arguments were to prevail, it would potentially bring down the entire statutory regime for Patent Office review (or at least re-review) of patentability decisions -- affecting hundreds of patents (and ultimately patent cases) each year.
John O’Quinn, a frequent Federal Circuit practitioner with Kirkland & Ellis LLP in Washington D.C., will introduce the topic and its implications for patent practice, and Professor Aditya Bamzai, an expert on the Appointments Clause from the University of Virginia Law School, will discuss the constitutional issues presented by the case
John O'Quinn, Partner, Kirkland & Ellis LLP
Aditya Bamzai, Associate Professor of Law, University of Virginia School of Law
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Greg Walsh: Welcome to The Federalist Society’s teleforum conference call. This afternoon’s topic is titled “Appointments Clause Back in the Supreme Court: Patent Office Judges as Principal or Inferior Officers.” My name is Greg Walsh, and I am Assistant Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today’s call.
Today we are fortunate to have with us John O’Quinn, a Partner at Kirkland & Ellis, LLP, and Aditya Bamzai, an Associate Professor of Law at the University of Virginia School of Law. After our speakers give their opening remarks, we will go to audience Q&A. Thank you all for sharing with us today. John, the floor is yours.
John O’Quinn: Thank you, Greg. So eleven months ago in Arthrex v. Smith & Nephew, the Federal Circuit held that administrative patent judges who serve on the Patent Trial and Appeal Board, also called the PTAB, were unconstitutionally appointed because they act as principal officers within the meaning of the Constitution but were not appointed with the advice and consent of the Senate as required by the Appointments Clause. The Federal Circuit adopted a narrow remedial approach in which it, quote, “severed any problematic portions of the statute while leaving the remainder intact,” end quote. The court thus invalidated Title 5’s removal restrictions as applied to these administrative patent judges.
Now, because the APJ’s, or administrative patent judges, can now be removed without cause, the Federal Circuit concluded that going forward, they were inferior as opposed to principal officers. The Federal Circuit in turn has remanded scores of cases to the PTAB for reconsideration in front of a new panel of administrative patent judges than the one that had previously decided the case.
All parties have sought certiorari. And the government argued that there was no Appointments Clause violation at all, that a patent owner forfeits the issue by not raising it in front of the agency, in this case, the PTAB, and that, regardless, no remand was required in remedying the purported constitutional problem.
Conversely, the patent owners’ argued to the Supreme Court that the Federal Circuit did not go far enough in its remedy, that there is no remedy available here for the purported Appointments Clause violation. In the patent owners’ view, absent amending the statute to have a presidentially appointed, Senate confirmed, executive branch official who can review the decisions of the administrative patent judges, they necessarily function as principal officers, even if there are no restrictions on their removal.
And of course, nestled between those views are the views of yet others that the Federal Circuit got it exactly right in its decision. As the Supreme Court begins its October 2020 term, the question remains whether it will take this issue up, following on recent decisions such as Lucia v. SEC in 2018 and the Financial Oversight and Management Board for Puerto Rico v. Aurelius, which was decided last year.
Now, the Supreme Court, of course, [inaudible 03:32] and it had an initial set of grants of cases in its order list late last week. And it didn’t grant those cases, but it also did not deny them certiorari on Monday either. There was a different Arthrex case involving a retroactivity issue that was denied, but not the Arthrex cases that involved the core Appointments Clause issue. These cases instead have been relisted for the next conference, meaning that we could potentially see a grant of cert later this week, or perhaps we will ultimately see a denial of cert, maybe with a dissent or two, maybe someone like Justice Gorsuch.
With all that said, the stakes in these cases are quite high. Even on its own terms, left unaltered, the Federal Circuit’s decision will lead to do-overs for potentially hundreds of patents that had been invalidated. And if the patent owners’ arguments were to prevail, well, that would go even further and potentially bring down the entire statutory regime for Patent Office post grant review of patentability decisions, affecting hundreds of patents and, ultimately, patent cases every year.
The administrative patent judges that are at issue in these cases are the ones who decide what is called inter partes review and post grant review, IPRs and PGRs, and some other administrative proceedings as well. And these have become a common alternative to litigating invalidity in patent cases in district court. And there are a couple reasons for that. One is because there is a lower standard for proving invalidity in these administrative Patent Office proceedings, simply a preponderance as opposed to clear and convincing evidence, and also because of the comparative expertise that administrative patent judges bring in digging into technical issues compared to a typical lay jury. Administrative patent judges are required by statute to have a technical background, and this is literally what they do for a living.
Now, by way of comparison, in 2019, there were about 3,000 patent cases filed in district courts throughout the country. And during that same time period, there were about 14,000 IPR petitions that were filed, about 800 of which were instituted by the Patent Office. So what that means -- each one of these IPRs involves an individual patent, and it means that administrative patent judges are today involved in a sizeable part of the patent litigation docket across the country.
Now, here with us to discuss the constitutional issues presented in Arthrex and in related cases is Professor Aditya Bamzai from the University of Virginia Law School. Professor Bamzai is a constitutional law and administrative law scholar who teaches and writes on these topics and is an expert on the Appointments Clause. So with that, let me turn it over to you, Aditya. Thank you.
Prof. Aditya Bamzai: Thank you. Thanks, John. And I just wanted to say that I’m delighted to be joining you, John, my old colleague from whom I learned so much at the beginning of my career about how to practice law. And it’s great to join you on this topic which marries our two interests, yours, of course, from the patent perspective with your background before the federal circuit and all the cases that you’ve argued since we were junior lawyers together. So it’s great to be here. Thanks for having me.
I thought since John gave some of the practical background to the case and what’s at stake that before I started to discuss the issues, what I might do is give a little bit of the historical background in the sense of the different separation of powers issues that have arisen in closely related contexts or in this context involving the Patent Trial and Appeal Board, the PTAB. As John mentioned, what’s at stake here is an appeal from the PTAB to the Federal Circuit, and that appeal occurred from a three-judge panel, the PTAB, which was assessing the patentability of certain challenged claims.
And the form of review, as John mentioned, is called inter partes review. It’s a type of hybrid proceeding that’s occurring within the executive branch that has adjudicatory characteristics similar to court proceedings. And although I think I’m about to start to launch into a discussion of some technical provisions, constitutional law and separation of powers, I think if you step back and think about what’s at stake in the case, that is really what’s at stake in the case is the ability of Congress and the executive branch -- Congress to enact laws, the executive branch to conduct these adjudications, I think you might look at and think of as being court-like proceedings within the executive branch rather than within Article III courts.
How can that be done constitutionally? That is really, in some respects, what’s at stake in this case, even though what we’re going to talk about now might seem as though it’s getting in the weeds of parsing different provisions in the Constitution.
If you’re reminded by the PTAB, and you’re thinking, “Hey, didn’t we see that term before, or that board before the Court in a recent separation of powers case?”, the answer is yes. There was a recent challenge to adjudications by the PTAB that was premised on different grounds. It was under the Seventh Amendment’s jury trial right ground and Article III’s limits on the types of adjudications that can occur outside of Article III or federal courts.
There was a challenge that was brought, and it made it to the Supreme Court in the case Oil States v. Greene’s Energy, and it was resolved in 2018 where the Court did say that the types of cases that had been assigned to the PTAB could constitutionally be assigned to the PTAB. So that was a challenge under Article III and the Seventh Amendment in which the Court upheld the PTAB under the separation of powers.
Here, now, in the Arthrex and Polaris cases, we’re dealing with different challenges. So now we’re looking at a challenge under the Appointments Clause of the Constitution, and although the technical challenge is under the Appointments Clause, the issues that are implicated in the Arthrex and Polaris cases are very interesting and go much further and relate to questions about what kind of supervisory power do high level executive branch officials have to have over lower level executive branch officials? What kind of power to fire those lower level executive branch officials must those high level officials have?
So just to start everybody off on the same page, I thought I would read out the portion of the Appointments Clause that is relevant here, so bear with me. This is the clause. It says that “the President shall nominate, and by and with the Advice and Consent of the Senate, shall appoint” all other officers of the United States, “but the Congress may by Law vest the Appointment of such inferior officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.”
And the way in which people typically parse this language is by saying that, okay, there’s one category of officers of the United States which we can call principal officers, and that category must be nominated by the President and appointed with the advice and consent of the Senate. So there’s one category of principal officers, and they must go through that nomination, advice, and consent process. There’s another category of officers, and they’re named here in the clause, the inferior officers, and Congress can, if it so chooses, vest their appointment in the President alone, in the court of law, or in the heads of departments.
And so the question that’s at stake here in the Arthrex case is what is the dividing line between the principal officers, who must go through advice and consent, and inferior officers? And John mentioned in his introductory remarks that the Court recently, in the recent past, has been very interested in these types of structural separation of powers issues. We’ll see whether they’re interested in Arthrex.
And one case that may come to mind to some of you who are on the call is the Lucia case that John also mentioned which was a challenge to administrative law judges that were within the Securities and Exchange Commission, the SEC. And the question there, just to make sure we see the different issues, was whether the ALJs within the SEC were, quote, “officers at all,” that there is a way in which you can categorize executive branch employees as non-officers. And the modern term for that would be they are employees. And they don’t need to be appointed either in the mechanism, using the mechanism that the Appointments Clause sets out for principal officers or for inferior officers.
And what the Court had held in Lucia is that administrative law judges who were within the SEC, they were, in fact, officers. And if they are inferior officers, I suppose you could think of it as being not that big of a deal. It’s not that big of a fix to require the SEC to properly appoint them, and that is, in fact, what the SEC did in light of Lucia. They appointed the ALJs within the agency as officers within the agency.
So that’s all by way of background and leads us here. That’s a different line between employees and officers that was at stake in Lucia. Here, we’re asking whether the members of the PTAB board, whether the members of the PTAB are principal or inferior officers. And once again, if they are principal, they must go through the advice and consent process. If they are inferior, there are other ways in which to appoint them.
And I’ll just point out as one other little bit of parenthetical history, there was a time in the olden days when administrative patent judges in a predecessor version of the PTAB were appointed by the director of the USPTO who arguably was not the head of a department under the Appointments Clause. And that problem was fixed. So there was a separate constitutional problem with respect to these administrative patent judges. That problem was rectified, and APJs are now appointed by the Secretary of Commerce, who is undoubtedly the head of the department, the Commerce Department.
And what we’re left with is people who -- APJs who are on the board along with the director, the deputy director of the PTO, the commissioner for patents, the commissioner for trademarks. And the administrative patent judges are undoubtedly properly appointed. If they are inferior officers, they are not properly appointed. They have not gone through the advice and consent process if they are principal officers, and that is where we are with respect to the challenge that was brought in this case.
And I just thought I would pause right there, John. I wonder if you have any comments on the history that has brought us to this point that I thought might be useful for the audience for me to lay out.
John O’Quinn: Yeah, I think that’s a great summary of how we got into the questions that are currently pending before the Supreme Court. And I do recall that there was debate and discussion about whether or not administrative patent judges needed to be appointed by the Secretary of Commerce as opposed to the just by the PTO director. And as you pointed out, that was resolved.
So we’re really not dealing anymore with the question of whether or not they are officers that are properly appointed as opposed to employees. Now it’s a question of what type of officers they are. And as I think you’re about to address, the courts have approached that in a variety of different ways, both practically and functionally in terms of their role, their responsibilities, and their duties.
Prof. Aditya Bamzai: Yeah, absolutely. Agreed. So I thought I would just spell out really quick what is at stake in the Arthrex case, and I think we could break it down into three separate issues. There is a question about how to properly present Appointments Clause challenges when you’re litigating before an agency. And I might describe this as the forfeiture question. And one of the petitions that has been filed in the case is by the Solicitor General of the United States. And the Solicitor General has said -- I mean, it’s unusual to get a forfeiture question before the Supreme Court. But the Solicitor General has asked the Supreme Court to review this forfeiture issue, and for that reason, it’s worth talking about. And we’ll talk about it in a moment.
Then there’s a separate merits question, and the merits question is related to the lead-out that I just gave a few moments ago that presented the history and the questions that are at stake in the case, and that is, are the administrative patent judges, the PTAB judges, should we conceive of them as inferior officers who then have been properly appointed, or should we conceive of them as principal officers? So that’s the merits question.
And then, finally, there’s the remedial question. And the question is, okay, well, if they are, in fact, principal officers and they have not been properly appointed, what are the appropriate remedies that should be used in order to correct this problem? And I think all three are at stake in this case.
And I guess I’ll start with the forfeiture issue, which we can touch upon briefly. It’s the one that perhaps is the least interesting to the audience, but it’s interesting enough that it merits a couple of sentences. And the basic point here is that in one of the cases that is pending before the Court, the party who was litigating before the PTAB and is now presenting an Appointments Clause challenge did not make that argument to the agency, and as a result, there was a question at the Federal Circuit when, in fact, an appeal was taken from the PTAB determination, whether that party could bring that type of challenge, an Appointments Clause challenge, for the first time in its opening brief in the Court of Appeals. And so there’s one case, the Arthrex case, that presents that issue.
There’s another case in which the party did, in fact, timely raise at the agency level the Appointments Clause issue and that has, therefore, been litigated throughout the whole process. And as a result, there’s no forfeiture issue in that case. Nevertheless, the Solicitor General said, “Supreme Court, you should take both of these cases. This forfeiture issue is important enough that that should get reviewed by the Court.”
We’ll, of course, see what will happen with respect to that maybe this week or in the weeks to come. But what’s at stake here is that in the Federal Circuit, the Federal Circuit determined that even though the party had not raised its Appointments Clause challenge before the agency, before the PTAB, the Circuit would allow it to present that challenge for the first time before the Court.
And the Federal Circuit really relied on two basic points. And the basic points are that there is, in fact, a Supreme Court precedent, the Freytag case, that allows courts to look past questions of forfeiture in the case of structural separation of powers issues in their discretion. And so the Federal Circuit invoked this part of the Freytag opinion and thought that it was applicable here in the context of Appointments Clause challenges to the PTAB appointments process.
And that may seem like perhaps not that big of a deal, but as John pointed out in his introductory remarks, there are actually huge consequences that follow on from this one holding in Arthrex, namely that there tons of people who evidently litigated PTAB proceedings and did not make Appointments Clause challenges who then may decide to file briefs for the first time before the Federal Circuit and invoke Arthrex.
And, of course, the Federal Circuit may be in the position of thinking, “Well, why should we treat these parties differently from how we treated Arthrex?” And all those cases, as I understand it, have subsequently been vacated and remanded in light of Arthrex. So there are consequences from this holding about invoking discretion to look over forfeiture.
There’s another aspect to the forfeiture issue, and that is that there’s at least an argument that it might be futile to raise an Appointments Clause challenge before the agency. And this raises the question whether the agency is in a position to declare itself to be unconstitutionally structured. And so the Court of Appeals believed that the implication of the Appointments Clause before the agency would be futile because the board couldn’t correct the problem. And the government has argued that that’s not correct.
And so the forfeiture issue just from the get-go presents a set of interesting questions that may have implications beyond the Arthrex case itself. And for that reason, I take it, the Solicitor General has asked for review of that issue. And we may have some interesting new law on that topic.
I thought I would pause right there and see, John, on the forfeiture issue, if you had any thoughts that you wanted to raise either on what I’ve just said or from the patent practitioner perspective.
John O’Quinn: Well, I think two things that I’d add to that, Aditya. So first, at a practical level, the forfeiture arguments, the difference between 100 plus remands versus probably just a dozen, or at most, a few dozen in terms of the number of parties that actually raised this in front of the PTAB, so it has some practical consequences.
I’ll also flag there’s another forfeiture issue that’s not presented in any of these petitions but that is kicking around. In fact, it was part of the Arthrex case in which certiorari was denied on Monday, and that’s whether or not the issue is forfeited if it’s not raised in a party’s opening brief in the Federal Circuit. That’s the line that the Federal Circuit drew between things that were raised properly on appeal as opposed to being raised belatedly on appeal.
There is an argument that this was an intervening change in the law and should be able to be raised at any time. And of course, if that were accepted, it would have even broader consequences in terms of the number of remands. But that does not appear to be at issue in the cases that the Supreme Court is still considering, at least in the ones that are queued up for their conference later this week.
Prof. Aditya Bamzai: Right, yeah. And I think it is an interesting -- which way this signal cuts is, of course, debatable, but from our perspectives, trying to read the tea leaves, we have a case that was denied by the Court that is not presenting the exact same set of issues, but is closely enough related that it makes you wonder, well, what do they mean? What’s about to happen with respect to the Arthrex case? At the very least, this is obviously a purposeful decision here to relist the set of cases rather than just a simple oversight or what have you.
All right, that’s the forfeiture issue in a nutshell, and then we move on to the merits, presenting the bigger, meatier part of the party’s briefing, and something that is very much of interest to the Court, given the Appointments Clause cases that they have taken in the recent past, including the Lucia case that we’ve already mentioned.
So here, we have a question of whether these people who are within the executive branch, APJs, administrative patent judges, are principal or inferior officers. And again, that may seem awfully technical, but if you think about the way in which the parties approach the question, you see that it implicates really important issues. And so the Federal Circuit as well as the Solicitor General and the private parties, they’re using a test to determine whether an officer should be thought of as inferior or superior that is derived from a Supreme Court case called Edmond v. United States, and that is from 1997.
And I will say, and this is what John was alluding to when he said that there have been different approaches to determining who is and who isn’t a principal and inferior officer, that there’s a discussion of this question in the very famous Morrison v. Olson case from 1988 in which the Court had to grapple with whether the independent counsel was an inferior officer in that case. And in a nutshell, the Court in Morrison v. Olson in 1988 relied on various attributes of the independent counsel office, including that the independent counsel performed only certain limited duties which were restricted primarily to investigation and, if appropriate, prosecution. It was limited to -- the office was limited in jurisdiction, also potentially limited in time because the office could be terminated at some point, so the office was temporary.
So one of the ways in which you might think of trying to determine if an officer is principal or inferior is by looking at the functions of the office or some of their attributes that you try to get a sense of is what the officer doing important enough. And there is a little bit of some, I would say, one of the issues that you might think about if that, in fact, were the test, one of the issues is that I previously pointed out that there’s a different line between employees who don’t have to be appointed pursuant to the Appointments Clause at all and officers.
And that line that I’ve just proposed or is there in Morrison v. Olson is a close -- it’s a very similar way to thinking of the line between employees and officers altogether within the line there under black letter Supreme Court laws, whether the individual possesses significant authority under the laws of the United States. And so there, you would look to the functions of the officer to find out how important they are. That would tell you whether you’re on the officer side, the inferior officer side, or the employee side. And there’d be some tension, I think, if, in fact, we were to follow the Morrison v. Olson route and use some of the same logic that Justice Rehnquist used in that case.
There’s a separate approach, and that is what Justice Scalia had argued in his dissent in Morrison, and it’s also what the Court appeared to embrace in the Edmond case. And that approach looks -- you might think of it, to simplify, at the org charts. Where are you on the organization chart such that we can categorize you as either principal or inferior?
And the Federal Circuit looked at Edmond, and it distilled three factors from Edmond itself. And I suppose you could look at this as three factors. You could look at it as two factors. It’s all the same, probably. But looking at it from the perspective of the Federal Circuit, these three factors -- the factors were the following. They were whether an appointed official has the power to review and reverse the officer’s decision, the level of supervision oversight an appointed official has over the officers, and three, the third, is the appointed official’s power to remove the officers.
In a nutshell, what you’re looking at there is an officer would be thought of as inferior if someone else between that officer and the President, some other superior, has the ability to review them and reverse them, and to remove them, and to supervise them. These are basically the catchwords in the test that’s being distilled from Edmond.
And I think the questions, as you can see, that are now posed by the case become really quite important because what the case appears to present is, what’s the degree of supervision and oversight that superior officers must have over inferior officers? What is the role of the superior officer’s removal authority over inferior officers? How can we think about that type of supervision and oversight? And what’s the critical line that tells you whether someone is being insufficiently supervised such that they have to go through advice and consent? That’s it in a nutshell.
And the Federal Circuit held that, in fact, these APJs, they were not sufficiently supervised in order to make them inferior officers. And just if I were to tick through really quick some of the reasons that the Federal Circuit gave, and then I can turn it over to John again to see if he has any thoughts on the merits. The issue from the perspective of the Federal Circuit was that there’s no provision or procedure that allows the director to singlehandedly review, nullify, or reverse a final written decision issued by a panel of APJs.
So essentially, if the parties are dissatisfied with a board decision as to patent validity or patentability, in that instance, they have to request a rehearing by the board, or they can appeal to an Article III court. So it’s not simply the case that if a decision is made by a panel of APJs that the director can singlehandedly decide that decision is incorrect according to the Federal Circuit in their parsing of the statutory scheme.
By contrast, then, the government said, “Okay, look, but there are multiple tools that the director has to review decisions by APJs.” So for example, the government -- the director has the authority to intervene, become a party in an appeal following a written decision with which he disagrees, so that’s one way in which the government, the director’s side, can get involved in the case. The director also has the ability to issue policies that the APJs would have to follow, and so there are some ways in which the government is in a position through the director to review the APJs.
Oh, I should mention one more, which is that the director does have the authority under the statute to determine which, if any, board cases each individual administrative patent judge would adjudicate. So there’s a way in which the director can allocate cases to particular panels, although it so happens that the director has, in fact, delegated that authority to the chief judge of the board, subject to certain guidelines. So even though that’s been delegated by internal regulations, that’s something that the director at least nominally has under the statute the ability to allocate cases.
So those are the ways in which the director could be thought of as not having supervisory authority over the panels, namely that the director, you might say, doesn’t have the ability to review, nullify, or reverse final written decisions. It should by panels, but there are also ways in which the director can more broadly set policy and require the APJs to follow this policy.
The director can assign cases. The director then also has the authority to appoint and remove APJs, but that authority comes with a caveat, which is that the removal provisions that are included in Title V of the U.S. code in 7513, which allows removal only for such cause as will promote the efficiency of the service apply to APJs. So there’s an appointment mechanism. There is a removal mechanism, but the removal mechanism is limited in the sense that there’s only certain causes that allow for removal. All right.
So I guess, John, I wonder if you had anything that you -- if you had any reactions to that. I guess at this point, I’ve just set up the issue, which is that here we have a set of officials who are within the executive branch, these APJs, and they are reviewed by superiors in some sense. They’re not reviewed in other senses. They are appointed by superiors. They can be removed for some reasons, but not all reasons. And I think that’s the heart of the case.
John O’Quinn: Well, and Aditya, the removal mechanism you were referring to ends up becoming the lynchpin of the Federal Circuit’s remedy in the Arthrex case, which I know you’re going to discuss next.
But let me flag an issue that I don’t think has been identified in any of the briefing, and I’ll give it back to you in the form of a question. Even if you accept that no one who is appointed by the President and confirmed by the Senate within the executive branch had the power to review and reverse the decision of the APJs, set aside whatever ability they have to channel it or to encourage it or discourage it, but didn’t have the power to review and reverse a particular decision. There are, of course, persons who are appointed by the President and confirmed by the Senate who do expressly under the statute have the power to review and reverse APJ decisions, namely, the U.S. Court of Appeals for the Federal Circuit.
And so my question is, we know from Morrison v. Olson that the branches, the executive branch and in this case, the judicial branch, are not hermetically sealed from each other for purposes of the Appointments Clause under the Supreme Court’s jurisprudence. After all, the independent prosecutor -- or independent counsel was appointed by the courts, even though they were supervised by the executive branch in Morrison v. Olson.
This case involves sort of a flip on that where persons are appointed by, and in some sense, at least in some ways, supervised within the executive branch, but a subset of their activity or some of their specific decisions are potentially only reviewed by the Judicial branch. What do you think that does to the Appointments Clause analysis once we start looking between branches?
Prof. Aditya Bamzai: Right, yeah. I think that’s a really interesting way to look at it. In some sense, it’s the mirror image of what happened in Morrison v. Olson where part of the problem in that case involved the appointments process. Here, the appointing party is within the executive branch and doesn’t pose the same set of issues as perhaps an appointing party outside of the executive branch, say, a court of law, would have posed.
But to the extent that you think that the APJs are making decisions that really cannot be reviewed within the executive branch, and again, I’m just going to bracket, there is obviously some debate about that, and the government disputes that to some degree. But to the extent that you believe that, there is this other review mechanism, namely review is happening through appeals to the Federal Circuit. And is that sufficient?
And I think, at least, there are obviously going to be different approaches to how to address that question and here’s where I think this poses a huge question that has really been debated since the United States government was created. And I think it goes back that far. And if I think in my own mind at certain analogues that existed -- not to the PTAB, of course. We didn’t have -- I shouldn’t say we didn’t have. There were patent boards at the time or shortly thereafter. We didn’t have the exact same structure.
But, for example, there was a bill to create in the first Congress, the Department of the Treasury, and within the Department of the Treasury, there was an official that was assigned, and this is the Comptroller of the Treasury, the functions that you might now associate with the Court of Claims, essentially certain types of adjudicatory functions and paying out money to individuals who had claims against the government.
And one of the disputes that arose over the course of decades -- and there are, in fact, attorney general opinions on this topic. There’s a letter that you can find from President Thomas Jefferson addressing what he thought his authority was over the Comptroller of the Treasury and his ability to direct the Comptroller of the Treasury.
Now, it’s not exactly the same thing as what we’re dealing with here because there were no removal restrictions in the statute. That weren’t any provisions that said the Comptroller of the Treasury couldn’t just be removed by the President or through the Secretary of the Treasury or what have you. But there was a question with respect to whether the President or the Secretary of the Treasury could direct the Comptroller of the Treasury to make certain payments in certain ways. And so this is an issue that crops up at that point, really early on in the country’s history and at various points over the course of decades when the question is assessed as the government starts to add on these adjudicatory-type bodies within the executive branch.
And I think what’s really interesting is if you look at a case like Myers v. United States, obviously, one of the leading precedents on the President’s authority to oversee the executive branch, dealing with the removal authority the President has over inferior officers who are appointed by him. And I think if you look at Myers v. United States, you’ll see that Chief Justice Taft addresses certain precedents that deal with inferior officers.
And there’s a case that I’m thinking of in particular called United States v. Perkins from 1886. And Chief Justice Taft addresses that precedent by basically saying the rule for certain inferior officers with respect to removal might be different. And then he also addresses certain types of adjudicatory-type bodies and comes to the conclusion that it’s possible that there could be adjudicatory bodies within the executive branch who couldn’t be directed in terms of their individual decision making by the President.
And I’m paraphrasing, obviously, that language, and so you’d have to go look at the opinion just to catch all the nuances. But the point is that there’s this attempt by Chief Justice Taft to save adjudicatory-type bodies within the executive branch through the use of this reading of removal restrictions on inferior officers as well as on the ability of the President to direct individual decisions.
And that’s what we’re looking at again in the Arthrex case. We’re looking at it, albeit from the vantage point of whether these officers are principal or inferior because are they directed, are they supervised, are they removable? That’s the issue, and it’s been at stake in all these other controversies over decades.
John O’Quinn: Well, I think that brings us to the issue of remedy. And obviously, the Federal Circuit thought that it could craft a narrow remedy here to resolve the issue. What’s your assessment of the remedies issues and the issue on remedy that’s before the Supreme Court right now?
Prof. Aditya Bamzai: Yes, so I guess what I would say is that there are a number of recent cases that have addressed the question of remedy in a way that, to be fair to the Federal Circuit, is really quite similar to how the Federal Circuit addressed this point, which is that once you accept, if you were to accept, that there’s some sort of Appointments Clause problem here, well, one way that conceivably you could solve that problem is by excising the tenure protections, the restriction on removability from the statute.
And that’s, in fact, a remedy that the Supreme Court has used, embraced, in cases like Free Enterprise Fund as well as most recently as well in the CFPB case. And so there’s some logic to what the Federal Circuit was doing in this case. And I suppose the question you might ask yourself is if you’re a party who is challenging the consistency of the PTAB review process with the separation of powers, are you really happy that the remedy you receive after bringing a successful challenge is that you will, in fact, be subject to PTAB judges; it’s just that those PTAB judges won’t have any degree of independence from superior officers within the executive branch.
And I think that there’s been this position, and it was articulated in one of the Fifth Circuit cases involving these new -- the agencies, the FHFA and the CFPB. And in a concurrence in one of those opinions, the point is that there should be more robust remedies for separation of powers purposes. And I think we’ll see. We’ll see whether that argument goes somewhere. The argument that you excise portions of the statute now has a fair amount of precedence in the Supreme Court’s recent cases.
John O’Quinn: And is it fair to say that what the Court might do on remedy to some extent depends on what it views to be the nature of the constitutional problem, if it finds that there was a constitutional problem at all? In other words, if it views it as the lack of supervision versus viewing it as an inability to be able to review and reverse the decision of the APJs themselves, how you conceptualize the issue could have some bearing on what the scope of appropriate remedies might be.
Prof. Aditya Bamzai: That’s certainly correct, absolutely. And one of the challenges, I think, of the Supreme Court’s approach to remedies in this area is, in some respects, it asks you to put yourself in the shoes of a hypothetical Congress. If the hypothetical Congress had known about this Appointments Clause problem or whatever other problem you’ve identified, how would they have fixed the statute? And then you go and you kind of like carve out little pieces of the statute that you think that would have been the least problematic portion -- sorry, the portion that most members of Congress would have been willing to drop if, in fact, they knew that there was this constitutional issue.
And that, of course, just that notion that you would put yourself in the shoes of a hypothetical Congress presents all kinds of challenges because that Congress does not exist. We just don’t know what they would have wanted. And I think the facts of this case present that issue pretty starkly because you may ask yourself, well, would Congress have created an adjudicatory system within the executive branch without any tenure protections? Is that something that Congress would have ever desired or wanted?
And so I think, yes, you would have to think about what the specific constitutional violation is. You would have to tailor the remedy to that, and you’d have to think of what that hypothetical Congress would have wanted.
John O’Quinn: Well, Aditya, thank you for sharing your expertise on the Appointments Clause issues. You certainly know this area extremely well. And who would have thought that patent cases would bring us all of these interesting constitutional law issues?
With that, let me turn it back over to Greg and see if there are any questions from the audience.
Greg Walsh: Let’s go to audience questions. We will now go to the first question.
Richard Sand: Yes, this is Richard Sand. I have a question about the pending FHFA case before the Supreme Court, Collins v. Mnuchin. Do you think that the Court is likely to hold off on hearing any of these Arthrex cases until after the Supreme Court decides the Collins case, or do you think that it thinks that the patent system really can’t wait another year to get a result here?
John O’Quinn: Aditya, I don't know if you have any thoughts on that one. Given the number of petitions and the fact that the government is a petitioner, I would have thought that if the Court was inclined to take this case, it wouldn’t wait on another case. But it obviously has a lot of discretion over its docket and can certainly take things in the order that it wants. Aditya, maybe you have some more specific insights on Collins and the intersection here.
Prof. Aditya Bamzai: I can’t say that I have any brilliant insight on that topic. It’s possible that there will be some intersection. And just to back up a moment for our audience, the Collins v. Mnuchin case is going to address the question of the President’s authority to remove the Director of the FHFA. And so, much like the case involving the Consumer Financial Protection Bureau, the CFPB, that was decided earlier this year by the Supreme Court, there’s a question in that case involving the removal restriction over the FHFA.
And I think there are some interesting potential intersections between Collins and the Arthrex case, namely that we will see, of course, when the case is fully briefed, but presumably, the person who will be defending the constitutionality of the FHFA structure will come up with some ways to distinguish the CFPB precedent, and one of those ways could conceivably — and here I’m just hypothesizing; I don’t know — but could conceivably be to latch on to some of the FHFA’s functions, which could conceivably be characterized at adjudicatory, conceivably. And if, in fact, that is the case, then you would potentially have some real intersection between these two.
All that said, so that’s just kind of on the merits and my thoughts about ways in which these cases could overlap. On the tea leaf reading itself, I’m afraid that I don’t have any brilliant insight. It’s hard to put ourselves in the shoes of the justices and try to figure out what they might be thinking about scheduling cases. My understanding, and perhaps John would know more about this, is that this is one of those moments where the justices are looking for cases in the sense that the docket is not completely full. And perhaps that would counsel in favor of a grant just because I think that sometimes there is just a practical consideration of having a full and healthy docket.
So if you were to think of all those things together, I’m not sure which way it cuts. But those are just some of my thoughts.
Greg Walsh: We’ll now go to our next caller.
Paul Jorgensen: Hi. This is Paul Jorgensen from New York. My question is the Trademark Trial and Appeal Board, the TTAB, and the ITC also have similar appointments and have operated this way for decades. How is PTAB any different? I’m not aware of any challenge -- a similar challenge on Appointments Clause to either of those bodies.
John O’Quinn: Well, I’ll start with the -- I believe you said the ITC. And the commissioners to the ITC, of course, are appointed by the President and confirmed by the Senate. Now, to be sure, they have administrative law judges who work for them, who make decisions that are then referred to them for review. And how those ALJs are appointed might raise some of the same issues that were at issue, hypothetically, that were at issue in Lucia v. SEC. I don't know offhand how the administrative law judges within the ITC are appointed, but ultimately, their work is, of course, reviewed by the ITC itself, which is a body that’s appointed by the President and confirmed by the Senate. So I don't think that it presents any of the same issues.
I don’t recall off the top of my head how the TTAB is composed or how its functions fit in for purposes of reviewability, either within the executive branch or without, so I can’t speak to it off the top of my head. I will say, though, that a number of the arguments here that are being made about PTAB judges would have applied to the same individuals in prior capacities before the PTAB was created. And indeed, the Federal Circuit has extended its ruling beyond the context of IPRs and PGRs to address other contexts, including contexts that existed before the America Invents Act was adopted, which suggests that this issue was potentially lurking out there in some respects but simply wasn’t one that people had been motivated to bring until the creation of the PTAB in its current form.
Aditya, I don't know if you have any thoughts on either of these specific examples that Paul raised.
Prof. Aditya Bamzai: Yeah, so not the specific examples. I’m afraid that I don’t know enough about the TTAB to speak. But I think the question raises a very good point, which is what are, in fact, the implications of the Federal Circuit’s holding in Arthrex? And as we discussed when we were talking about the merits, the Federal Circuit said, “Look, if you are conducting adjudications within the executive branch, you’re not overseen sufficiently. You’re not reviewed sufficiently. And you’re subject to some sort of removal restriction.” Then, conceivably, you are not an inferior officer, but rather, a principal officer.
And if we were to accept that, there are, in fact, other entities within the executive branch who conceivably fit that bill. Now, when I say conceivably, here and now, we are going to step into the world of shades of gray as opposed to a bright-line rule. What is sufficient to make someone sufficiently overseen or sufficiently reviewed? And are there, for example, administrative law judges that we would be able to find who we would argue are not sufficiently overseen or sufficiently overseen under the rule in Arthrex? And I think that’s something that we would have to go research.
The point is that I think that the basis for the question is, well, what are the implications for these other adjudicatory bodies? And I think that is absolutely valid, no doubt. That’s one of the reasons why the Solicitor General has filed a petition here in this case because it’s not just about the PTAB judges.
Greg Walsh: Well, we don’t have any callers in the queue, and I do want to be cognizant of the time. Professor and John, do you have any concluding thoughts?
Prof. Aditya Bamzai: You know, John, I’ll just mention I loved your quip about how who knew that the patent system would raise all of these interesting separation of powers questions. And I guess one way we can think about it, either as practitioners or -- I can’t say that I’m a scholar of the patent system, but if we think about just the arc of the administrative government within the United States, the patent system, that’s one of the early administrative agencies. And they were there doing patent-type stuff from way back in the day.
And so just the notion of what is a patent, how to conceptualize it both in economic terms -- is it an unwanted monopoly? Is it an incentive to a free market? And then how should we distribute these patents? Should we have administrators make decisions? Should we have Article III courts make decisions? The patent system, along with very few other administrative agencies made a whole lot of precedent in that area, so I think if we see some more precedent here, perhaps we shouldn’t be so surprised.
John O’Quinn: I think that’s a great note to end on. And the only thing that I’ll add to it is to echo a point you made a moment ago, Aditya, which is that the issues here really do transcend patent law. Yes, they arise in the context of the Patent and Trademark Office and the PTAB and the relatively new adoption of those procedures back with the America Invents Act, but the issues here could be arising in almost any context. They’re really fundamentally issues of administrative law and fundamentally issues that go to the heart of separation of powers and what is and is not required.
And I think that’s why there’s a lot of interest in this case and why the government is fighting so vigorously in this case because it’s not some backwater issue that is unique to one subspecialty. It really does potentially have ramifications for the overall structure of the administrative state.
Prof. Aditya Bamzai: Agreed.
Greg Walsh: Perfect. On behalf of The Federalist Society, I want to thank our speakers for the benefit of their valuable time and expertise today. We welcome listener feedback by email at email@example.com. Thank you all for joining us. We are adjourned.
Dean Reuter: Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s Practice Groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at www.fedsoc.org.