On June 21, 2021, the US Supreme Court decided United States v. Arthrex, Inc. Writing for the 5-4 majority, Chief Justice Roberts explained that the patent judge's unreviewable authority is incompatible with his appointment as an inferior officer.
Justices Alito, Gorsuch, Kavanaugh, and Barrett joined Parts I and II of the opinion, and Justices Alito, Kavanaugh, and Barrett joined Part III of the opinion. Justice Gorsuch filed an opinion concurring in part and dissenting in part. Justice Breyer filed an opinion concurring in the judgment in part and dissenting in part, in which Justices Sotomayor and Kagan joined. Justice Thomas filed a dissenting opinion, in which Justices Breyer, Sotomayor, and Kagan joined as to Parts I and II.
- Prof. Gregory Dolin, Associate Professor of Law and Co-Director, Center for Medicine and Law, University of Baltimore School of Law
- Prof. Dmitry Karshtedt, Associate Professor of Law, The George Washington Law School
- Moderator: Prof. Kristen Osenga, Austin E. Owen Research Scholar & Professor of Law, The University of Richmond School of Law
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As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.
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Nick Marr: Welcome, everyone, to this Federalist Society virtual event, as this morning, [inaudible 00:24], we appreciate the panelists’ time and all of you who are calling in. This morning, June 24, 2021, we’re discussing the Supreme Court’s recent ruling in United States v. Arthrex. I’m Nick Marr, Assistant Director of Practice Groups here at The Federalist Society.
As always, please note, that expressions of opinion on our call today are those of our experts. We have a great panel. Before we get started, and I’ll just introduce our moderator, a quick note to our audience that we’ll be looking to you for questions, so please submit those via chat or the Q&A chat function, and we’ll take them as we can, probably, in the second part of the call.
And with that, we’re very pleased to be joined this morning, to moderate this conversation, by Professor Kristen Osenga. She’s an Austin E. Owen Research Scholar & Professor of Law at the University of Richmond School of Law. Her longer bio can be found on our website as with the longer bios of all our participants, but in the interest of time, getting right to it. Thanks very much for being with us. Kristen, the floor is yours.
Prof. Kristen Osenga: Great. Thanks, Nick. As Nick mentioned, I’m Kristen Osenga, and I’m joined today by two of my friends: Greg Dolin from the University of Baltimore School of Law and the judging part of Palau. And Dmitry Karshtedt from the George Washington Law School.
So, as Nick mentioned, today, we are covering the Supreme Court’s decision in the United States v. Arthrex case. It was handed down on Monday, which is June 21st. I’m going to provide a very short background, and then Greg and Dmitry will explain the various opinions, and there were four opinions in this case, and 72 pages written. So there’s a lot to talk about.
After they lay down the decisions and the positions of the various justices, we’re going to talk about who’s right and who’s wrong and what the larger implications this decision may have for patent law, for administrative law, and beyond. As Nick mentioned, also, at the end of our discussion, there should be some time for questions, and we’ll let you know how do you get your questions to our panelists.
So this case started out as a patent dispute, specifically, when Smith & Nephew and ArthroCare filed a petition for inter partes review of a patent owned by Arthrex. So the inter partes review procedure, at issue in this case, was part of the Leahy-Smith America Invents Act of 2011, and what that is, is it’s a quasi-judicial procedure, within the patent office, that allows third parties to challenge the validity of issued patents. So just very superficially, the petitioner asks the Patent Trial and Appeal Border, PTAB, to consider whether one or more claims of an issued patent, owned by someone else, is valid, and the director of the Patent and Trademark Office decides whether to institute one of these inter partes review proceedings.
If it’s instituted, then a three-judge panel, usually, of administrative patent judges, or PTAB judges, or APJs will then conduct the inter partes review in a quasi-judicial way. After the panel hears the evidence, it will make a decision, and the board will issue a final written decision, determining the patentability of the challenged claims, and then after a period for appeal has passed, the director of the patent office will issue a certificate, cancelling any claims the board determines to be unpatentable.
So in this case, Smith & Nephew petitioned for an inter partes review, that was instituted. A three-judge panel of PTAB judges determined that a number of claims of the patent, belonging to Arthrex, were invalid and unpatentable, and the board issued its final written decision. Arthrex then appealed to the United States Court of Appeals for Federal Circuit and argued that the appointment of the judges, that heard the inter partes review, were not constitutionally appointed.
So the United States Constitution provides that principal officers must be appointed by the president with the advice and consent of Senate, while inferior officers can be appointed by the president, or courts of law, or heads of departments. So the PTAB judges, who hear these inter partes reviews, are appointed by the Secretary of Commerce in consultation with the director of the patent office. And so Arthrex argued that these PTAB judges, based on the authority they hold and the functions they do, were principal officers, and because they were not appointed by the president with advice and consent of Senate, they were unconstitutionally appointed, and so therefore these inter partes reviews are unconstitutional.
The Federal Circuit agreed with Arthrex’s argument, holding that the APJs were indeed principal officers, and to solve the dilemma of having this entire body, the PTAB, being unconstitutionally composed, the Federal Circuit severed the removal protection that had been given to the APJs in an effort to make them look more like inferior officers and preserve the rest of the inter partes scheme.
Not surprisingly, nobody was happy about this. Each of the government, Smith & Nephew, and Arthrex requested rehearing en banc, unsuccessfully, at the federal circuit, and then each of those parties filed a petition for cert at the Supreme Court, seeking review of various aspects of the Federal Circuit’s decision. The Supreme Court granted cert to determine whether the PTAB and its structure is consistent with the Appointments Clause of the Constitution, and if not, what the appropriate remedy should be.
As I mentioned, the decision generated four separate opinions. You might need a Venn diagram for this. I saw one on Twitter this morning. They do exist. Justice Roberts wrote for the majority in a 3-part opinion, holding that the appointment of the PTAB judges, as inferior officers, was incompatible with the authority they have in the patent system, and for those parts of his opinion, he was joined by Justices Alito, Gorsuch, Kavanaugh, and Barrett.
In the final part of the majority opinion, Roberts wrote that the Federal Circuit’s fix, that is removing the PTAB judges tenure, was not the solution, and instead that every decision must instead be reviewable. That part of the majority opinion, it was joined by Justices Breyer, Alito, Kavanaugh, Barrett, Sotomayor, and Kagan.
So then we have the other opinions. Justice Gorsuch filed an opinion, concurring in part, but dissenting as to the remedy. Justice Breyer filed an opinion, dissenting as to whether or not this actually a problem but agreeing with the remedy of one must be granted, joined by Justices Sotomayor and Kagan. And Justice Thomas filed a dissenting opinion, joined by Breyer, Sotomayor, and Kagan, as to the nonexistence of the problem with the appointment of the PTAB judges.
So if that was confusing, good. I explained it exactly right. And now to clear this all up, I’m going to turn to my expert panelists. Greg is going to go first and explain the Roberts majority opinion, as well as the Gorsuch opinion, and then he’ll be followed by Dmitry, who will explain the Breyer and Thomas opinions, and then we’ll talk about right, wrong, and implications. So Greg, I turn it over to you.
Prof. Gregory Dolin: Thank you, Kristen. Thank you, Federalist Society. It’s always a pleasure to be on one of these phone calls, and it’s a particular pleasure to be with my friends Kristen and Dmitry, with whom we often agree, sometimes disagree, but always come to some sort of new understanding about the legal issues involved, so I’m looking forward to the continuation of this discussion.
So Roberts’ opinion, as Kristen suggested, comes in two parts because the case up in two parts. The first question that the Court had to wrestle with was whether or not the APJs are principal or inferior officers, given the authority of the exercise, given the statutory scheme that only allows the board, not the director of the Patent Office, to exercise the power to cancel patents and assigns the director all the administerial duty, shall issue a cancellation certificate, or a confirmation certificate, or whether or not the director retains sufficient amount of supervision, where although he might have administerial duty to issue the certificate, given how he can supervise the board by providing rules, removing judges, adding new judges, etc., ultimately, these are just inferior officers. So that was question number one.
And question number two was that to the extent, the first question was answered in a way to hold that judges, the APJs are in fact principal officers. The question is what to do about it? Because to the extent that they are a principal officer, everybody agreed that they were not constitutionally appointed. They were not nominated by the president and were not confirmed by the Senate. So if the Court were to conclude that these are principal officers, the question is what to do about it.
Like I said, we did a preview of this decision back in December, or I guess Paul's view of the argument when the case was argued. I think it was argued in December. No, I’m wrong. Sorry. It was argued back in, I think, February. It was the briefs were filed in December. So we did it a few months ago when we discussed this case, right, after the argument. I think all of us predicted then that it’s unlikely that anybody was going to endorse the Federal Circuit remedy of making these APJs removable at will, and ultimately, we were right. So [inaudible 09:44] notwithstanding, that part was easy. That was a 9-0. No one endorsed the Federal Circuit’s remedy.
But let’s go back to the first questions. Are these principal or inferior officers? And Justice Roberts, his opinion is a little bit baffling in my view because he had an opportunity to basically draw a clear bright line. It was advocated by – for example, in an article about President Gary Lawson, it was advocated by a brief that I submitted together with Ilya Shapiro for Cato Institute and a number of other amici, where the bright line was that unless there’s somebody above you, not merely entitled or not merely as of in grandeur, but somebody above you who can reverse that very decision that is being contested, you are a principal officer. That’s the bright line we proposed.
And Chief Justice Roberts’ opinion almost gets to this line, but not quite. He seems to hang a lot on this idea that, unlike the case which everybody relied on, both in the concurrence or dissent, and the majority opinion—that case is called Edmonds, which concerned the judges and United States Coast Guard Court of Criminal Appeals—all the judges were appointed by the Secretary of Transportation—also not by the president, not somebody who’s done a confirmation.
The reason the Court, a number of years ago, upheld that arrangement was because an appeal [inaudible 11:22] from that court to another Article I, as opposed to Article II tribunal, whose judges were indeed appointed by the president and confirmed by the senate. Plus, there was some supervisory power by the Judge Advocate General of the Navy, who could – or the Coast Guard, who could also supervise how the trials or appeals with the Court of Criminal Appeals proceeded.
And so Chief Justice Roberts relied heavily on Edmonds, but really emphasized the part of Edmonds that was absent in this case that, unlike in Edmonds, there is no higher-level tribunal to which PTAB decisions could be appealed to within the Executive Branch. He could've just stopped there and said, “Unless there’s such a tribunal, such an individual exists, then everybody who works as is—the final power or final say against the United States—is, in fact, a principal officer. But as he got to this line, he pulled back.
He left a fair amount of wiggle room to say that there might be other situations where perhaps a more functional approach, a more indirect supervision may be sufficient. It may be that I’m overreading that opinion, but maybe, it’s just a vintage Justice Roberts, where he doesn’t like saying more if he can just basically resolve a case on a very narrow ground. But it’s just, to me, it seemed odd where instead of just drawing that one particular strand out of Edmonds, he really, really leaned heavily on that fact of lack of review, and yet didn’t say that that is sine qua non of making principal versus inferior officer distinction.
But nonetheless, because the majority, a five-justice majority of Chief Justice Roberts, Justice Alito, Kavanaugh, Gorsuch, and Barrett concluded that this review is absent, that makes APJs principal officers, which, of course, then, led us to question number two. If these are principal officers – at least, the power of the exercise, right? And I guess later on, Dmitry and I will get into a debate, is it reasonable to call these APJs principal officers? But let’s put it – so let’s just [inaudible 13:43] that question for a moment.
If the power that these individuals exercise is the power that can only be exercised by principal officers, then it follows that these individuals cannot exercise that power because they were not appointed as the principal officers would have been appointed, i.e. by the president subject to Senate confirmation. So the question became, what to do about it?
Again, so full disclosure, like I said, I filed a brief on this, and together with a number of other amici, we suggested that there’s lots of ways to square that circle and different ways and different costs and benefits. So, for example, one way it could've been done is to have that second-level tribunal just like the Court of Appeals for the Armed Forces. Article I tribunal within the Executive Branch as Article II tribunal.
Another way of doing it is, this case you have a director have the final say. So the director have a personal – not that he necessarily had the right to exercise, but has the power of personal review. Yet another one would be, for example, scrapping the whole process altogether and reassigning the adjudication back to Article III, where it has been for 200-some years before AIA, which is ultimately what Justice Gorsuch suggested.
So there’s lots of way of doing this, and thinking of one versus the other involves a lot of policy choices. And so a number of amici—and myself included—we advocated that the Court leave that question alone, not endorse the Federal Circuit remedy, which the Court did not, and just kick it back to Congress, so Congress can decide which one of these issues they like better. And the reason, for example, we suggested – and I’ll get to a moment what the court actually did.
So the reason we suggested it that way is because the patent inter partes review process and post-grant review processes are a weird animal. On one hand, as the Court decided, just I think two terms ago in Oil States, this is the type of procedure that can constitutionally be done in the Executive Branch. On the other hand, it was very clear that Congress wanted some sort of neutral adjudicator. It didn’t want this decision to be done based on who has the most pull in the administration, and they didn’t want, for example, Apple to go complain to the Secretary of Commerce, when the decision doesn’t go their way to fire the Patent Office director.
They wanted to be some insulation from that type of politics. And it is somewhat hard to square that circle, which is why perhaps for a long time, that adjudication was done by the federal Article III judiciary. It can be done, but it’s not easy. And so that’s why I said a number of amici advocated let Congress figure out how to properly strike that balance.
The five-justice majority – again, it’s a weird five-justice majority because on the remedy portion, Justice Gorsuch parted ways with the previous five-justice majority on the merits. And so in order to get to any sort of remedy, Justice Breyer—as well, as I guess, Justice Kagan and Sotomayor—had to provide this grudging vote, where they said, “Look, we shouldn't do this anyway, but since we’re doing it, I will give you the vote to come to some sort of remedy that’s the least worse outcome,” from Justice Breyer’s perspective.
So it’s a different – it’s a shifting majority on the remedy, and the remedy became that it’s the director who will now have the opportunity to review. If the complaint was, “Look, there was nobody reviewing these APJs; nobody with the power to vacate that decision, to reverse the decision, well, now we have that guy.” And that guy is going to be the director of the Patent Office. The director of the Patent Office is presidentially appointed and Senate confirmed—problem solved.
Of course, like I said, that potentially leads to other problems because director, of course, is a political animal, politically appointed, politically responsible, with no [inaudible 17:42] protection and fireable at will, and so now we do have – we solved the Appointments Clause problem but potentially raised some due process problems as well.
And I’ll stop shortly, I guess, and one more thing that I wanted to add in terms of – well, I guess, I have to cover Justice Gorsuch’s opinion. I’m sorry. But one more thing I thought was a bit odd about Justice Roberts’ opinion is that it reminded me sometimes about – it reminded me of NFIB, where in order to save the statute—because Justice Roberts assumed that Congress would want something rather than nothing—the statute was rewritten.
So the way Justice Roberts arrived at his remedy, he said Section—I think, it’s 3(b), if I’m correct—Section 3(b), which limits who can grant rehearings and who can reverse the decision to the board itself. He said, “This section is no longer enforceable as against the director.” The reason I thought that was odd is because usually when you find a section to be unconstitutional, right, you do say, “Well, that’s actually not enforceable.” And maybe, it is severable; maybe, it’s not. And it says, “Look, the government can’t enforce that section against a particular individual or a particular person who can’t act.”
But here, by making that Section 3(b) unenforceable, saying only the board itself can grant jury hearings, it’s not clear what that means. Because if you take your pencil and strike that section out, it doesn’t mean that anybody else can grant rehearings either, so it becomes somewhat odd—a odd step, as to say, “Well, this section no longer is enforceable, but we're basically going to write a new section.” And so he said, “Rewrite of the statute,” which Justice Roberts has done a couple of times before, makes it for a bit of a weird adjudication. So in one sense, it’s very much judicial modesty, so you do as little as possible. On the other hand, it is usually judicial aggrandizement and basically rewriting the statute.
I promise I’ll cover Justice Gorsuch, and I’ll do it very quickly. Justice Gorsuch, like I said, joined the merits opinion, dissented on the remedy, and he spent most of his – and he really dissented on the remedy for the reason that I already highlighted, that I critique as to – he said, “Look, it’s a policy choice. Let Congress do it.” But he did spend a lot of his time basically lamenting that his view, in the case that I already mentioned, Oil States—which is a dissenting, two or three terms ago—where there was a more frontal attack on IPR, saying, “This entire process is unconstitutional because patents are vested rights and can only be canceled by an Article III judiciary.” Justice Gorsuch agreed with that view, but he was on a losing end of a 7-2 majority in joining up with Justice Roberts, and so he spent a fair amount of the dissent lamenting that the Court did not agree with his view in Oil States.
And again, as somebody who filed a brief in that case as well, urging the Court to take the position that Justice Gorsuch ultimately took, so I’m perhaps I’m somewhat partial. But I think there is some force to the argument saying that “Look, we made the wrong turn with Oil States, and now we’re basically trying to fit a square peg into a round hole, and none of the solutions are really good. We’re only talking about perhaps the least bad ones. And really, where we went wrong is several years ago in Oil States. We should’ve struck it down on the basis that these decisions ought to be made by Article III judiciary, just like they have been for the last 200-odd years.” And so that’s where Justice Gorsuch came out.
I think I’ve talked long enough. I think I can turn it over to Dmitry to discuss the dissents, and then we can talk about who’s right and who’s wrong.
Prof. Kristen Osenga: Thanks, Greg, that’s awesome. Dmitry, go ahead.
Prof. Dmitry Karshtedt: Yeah. Thanks to The Federalist Society for having me back. I remember the endurable discussion we had back in March, I think, right after oral arguments and predicting that probably this is not going to survive constitutional scrutiny, but at the same time, the whole system isn’t going to go down. And I think everyone’s predictions in that regard were correct, and now it’s time to discuss the aftermath. So Greg, I think, did a great job of covering the principle opinion, the Chief Justice Roberts’ opinion on the case and the Gorsuch opinion as well.
I’ll talk about the Thomas and Breyer opinions. Actually, for vote counting purposes, Breyers’ opinion is really important because it provided the three key votes for saving the PTAB, right, for basically agreeing with the remedy that the Roberts’ opinion wrote in, but Gorsuch did not join, so it initially got four votes, well, that part of the principle opinion, and then the Breyer’s opinion joined that. So for vote counting, that was an extremely important opinion. But I will start with the Thomas dissent because that is the principle dissent, and it’s not clear actually if Thomas supported the severability analysis. I don’t see, given his jurisprudence, you would like that analysis, so I’ll start with that.
But before I get into the dissents – I guess dissents by definition, I’m saying the majority was wrong, so there’s going to be a little bit of right or wrong already. But something that struck me out of Greg’s presentation, so the mood is you need political accountability. The reason why Appointments Clause is so important is you need political accountability. You need really, really close supervision of these officers that are basically not appointed with that advice and consent of the Senate.
But wait, you get political supervision, but that creates the potential advice. So we can’t have that either, right? So it creates a real conundrum for the design to an administrative system when you say you need political supervision accountability, but then that creates potential for bias. So maybe, the endgame here is the whole system is illegitimate, and maybe, that’s the answer, but that’s not ultimately how the votes came down.
So Breyer’s opinion has elaboration of Thomas’ opinion, and Thomas’ opinion is admirably textual to begin with. Thomas began by saying that APJs, PTAB administrative patent judges, are inferior because they have superiors, and just textually, they have multiple superiors. They have the director, and they have the Secretary of Commerce. They’re really somewhat low on a totem pole of the administrative state on its Department of Commerce, and it’s not even clear if they supervise anyone at all, right? So they write decisions to themselves. There’s examiners. There is primary examiners and so on. It’s not clear APJ’s supervise anyone. So they seem to be fairly inferior officers, just in their status of an agency. So that’s Thomas’ first point.
The second point is harking back to these cases. Greg mentioned one: Edmond and other cases, Morrison, is that the Framers actually provided very little guidance on the line between inferior officers and principal officers. And they provided some mechanisms for appointment for inferior officers including even the courts, but other than that – so there’s some process guidance, but not really a substantive guidance as to what constitute the features, or one or the other. And a theme in both the Thomas and Breyer’s opinions is that, given so little guidance, and given lack of clear lines, maybe, we should just defer to Congress in most, but really clear egregious cases of Secretary of State bypassing the advice and consent process or something like that because it’s just unclear what the line is. All right.
And I think the majority in the end is defensible on stare decisis purposes because Edmond did say, right, that an important factor in deciding principal versus inferior line is having the final word for the agency, and Thomas has a lot to say about that and a part of the opinion that only he wrote, historical analysis, but the part that the four justices joined in dissent basically just says, right, as a matter of constitutional text, as a matter of function, it’s just not clear if APJs play the function of principal officers.
So what are the mechanisms of supervision, right? So as Greg said, right, just grandeur is not enough. I’m signing your paycheck, and that’s it. But there’s actually a lot of supervision here, right? So the directors can initiate a rulemaking. So, for example, a claim construction, should APJs use broadest reasonable interpretation standard for claim construction versus a Phillips standard.
That is a huge mechanism of control, right? Xante and so on, right? The directors can have a presidential opinion panel. They can basically take an opinion by APJs, and the director can compose a panel of himself or herself, and then the commissioner of patents, and the deputy, or the chief judge of the PTAB and basically write that in, into the PTO precedent. And yes, it’s sort of smacks a little bit of stacking. I’ll talk to that more, talk about that more, but that’s something else the director can do to control how PTAB judges do their jobs, right?
And, of course, besides Xante control, there actually is ex-post control too, right, of substance of opinions. The director can take a regular piece of opinion, and then through the rehearing process, right, basically established, and it’s a precedent reversing, and so on. And, yes, again, that would require a director putting himself on the PTAB panel along with the commissioner of patents and the chief APJ, but that hasn’t been done, and I was just looking at recent – it’s called POP or Precedential Opinion Panel cases, and it’s done quite a bit, and it can involve a reversal of the panel, as well as, right, creation of rules Xante for the PTAB judges to follow.
So that is a lot of supervision, right—a lot of supervision. And the majority response seems to say, “Well, it’s just there’s a due process problem, and it’s not clear if sole review by the director is any better from the due process purposes, like creating a panel of three, but we can leave it at that. But as far as supervision is concerned, there is a ton of supervision within the PTO already.
And then Thomas goes on and makes some more textual points. Nothing about the appointment of APJs was improper. They were appointed by the Secretary of Commerce, right, which is a department head, and so on, and to the extent that the chain of command is broken, right, to the extent that there isn’t an intervening decision by the agency head, somehow the director – that line is broken every time that there is an independent agency, right?
So, for example, the Court of Appeals – so veteran’s claims, which Greg mentioned, is not accountable to the president. Those judges aren’t appointed by the sitting president. They supervise the VA, Veterans Administration. That is true, but they’re not accountable to the president. They’re an independent entity, right? So that chain of command is broken in administrative state constantly, so I guess what is happening is, right – so there’s this interplay between the vesting clause, which ensures a chain of command in the Appointments Clause, and Thomas’ accusation as the majority has joined the line between the two and trying to deduce this new power.
And I think the dig at the end of the opinion, joined by four justices, is quite remarkable, and says, “I would not be so quick to stare deeply into the numbers of the clauses to identify new structural limitation.” Of course, that calls back penumbras and emanations analysis of Justice Douglas in opinions like Griswold, and that’s exactly what Thomas was accusing the majority of doing here, right?
It seems to reason, to take this accusation to heart because the Court of Appeals to veteran’s claims is one example that Roberts uses of executive branch control. And by the way, right, examiner decisions and ex parte proceedings, which have been around for a long time, if there’s a rejection, it’s not appealable to the director either, right? It goes to the PTAB, so we’ll see maybe some further developments where maybe our ex parte examination process with appeals to the PTAB and then to the Federal Circuit is also legitimate, but that’s the way it’s been done for a long time.
And remember, right, the Court of Customs of Patent Appeals became an Article III court in 1958, right, so you got a direct – from the PTAB to the CCPA appeal, that’s being going for a long time. And this is not something that’s mentioned in the Thomas opinion, but the bizarre implication of this is that, if you strip the Federal Circuit of Article III status, then all of a sudden, we have a system that’s archaic because we just have an Article I court and the Executive Branch reviewing that opinion, even though it’s not accountable to the president, right?
So basically, right, the party opinion, joined by four justices, is just talking about how much supervision there rarely is in the system, nothing wrong with the process of appointment, and these officers act like truly APJs inferior officers. Then, there’s longer analysis, which is just by Justice Thomas, basically saying that, right, the historical analysis that principal officers status was never meant to apply to low-level officers, like APJs, just a sign of some Founding era analysis and also basically suggesting that Edmond is wrongly decided.
This whole agency theory that making decisions that bind to speak on behalf of the agency is not the right test for Appointments Clause purposes, and Thomas concludes his opinion, saying, “There’s something wrong when APJs are raised to the same levels as ambassadors and head of department as the Secretary of State,” and he just doesn’t think that is supported historically.
So he’s really questioning the Edmond case of which the Roberts’ opinion is relying quite heavily, and I think, unlike Greg, I would say it does almost harden Edmonds into a rule, right, that speaking on behalf of the agency because it’s not clear what wiggle room is there. But Greg is right. There is definitely some wiggle room. It’s not the rule, but it’s a very, very important factor that the officer say a final word on behalf of the agency. So this was the Thomas opinion.
I think Breyer, besides providing the key votes to save the PTAB, focuses on this language of “as they think proper” in the Appointments Clause, so Congress is given a lot of leeway again to design a system. By the way, also full disclosure, I signed the brief. I coauthored with Alan Morrison and Mark Lemley, among others, saying that there was supposed to be such leeway in the system, and I think even though Breyer didn’t cite our brief, I think, it seems like some of the opinions discussed are including some of his own of the opinions.
You also mentioned the brief. So there has to be some judicial deference of congressional design. Even minimal judicial deference should result in the affirmance of the scheme, right? This was a very activist majority, right, trying to take things down without any deference, right? So again, Breyer focuses a little bit on APJ independence, on how some independence is important because this is a technical agency, but like Thomas, he does remind us that there is a reconsideration power piece of opinions that director can initiate and just says that the Roberts’ opinion is very formalist in the way that is, but it’s just not defensible, right? It’s creating judicial roles.
So to the extent that there is a writing in of judicial legislation, it begins from the start, right, from the invalidation of the whole system, right? The Court is opposing its own policy choices on the agency, unfortunately. And he would take a functional approach—we’re short of—and leeway to Congress, which would be a good thing, and under that analysis, PTAB judges, APJs would be inferior officers.
But he is okay with the remedy in the end, right, so he joins—he and the two joining justices. Kagan and Sotomayor joined Part 3 and agrees that the system, that part of Section 6, that Greg mentioned, can be modified in such a way as to allow director the final word on every PTAB decision, which I think the director already has, but now the director will formally have, after this, constitutional cure. So I think that’s all I’m going to say about that. I also talked for a long time. I’m looking forward to further debate.
Prof. Kristen Osenga: Great. Thanks, Dmitry. So let’s move into talking a little bit about the implications because I think we may have heard already what you think is right and what is wrong through your amici participation, and what have you. One thing I was curious about – sorry, I’m just throwing questions out, and you guys aren’t expecting them. We practiced ahead of time, and this question never came up.
I was curious about this question. Greg, you mentioned – I think Greg, or maybe, it was Dmitry, that Breyer, and Sotomayor, and Kagan grudgingly joined along to give the remedy the necessary amount of votes. Do you really think it’s grudgingly or do you think it’s because Breyer doesn’t like patents as much as I do and saving the PTAB is probably a way to continue to get rid of patents, and Breyer doesn’t like – I’m not speaking for Justice Breyer here, but my inclination is he doesn’t love patents as much as I do, so maybe, it wasn’t grudging at all. Any thoughts on that question?
Prof. Gregory Dolin: I think it’s a grudging in a sense not that he’s unhappy that PTAB was saved. I think it was grudging in a sense that – grudging that he has to do it in the first place. I think he would've been happier if his view that there's function on analysis, which of course he’s famous for, but which, for example – although, I don’t teach admin law, but I do occasionally teach other courses written by Justice Breyer for the NIP. It makes it just impossible to teach this – well, I know what I see. If you come to us next time, and I’ll tell you what’s a good function, what’s a bad function. And it’s a multifactorial test.
It’s true, as Dmitry said, Justice Breyer does accuse Justice Roberts of being very formalist, but as Dmitry was talking, I really wanted to pop in and say, “Well, you say it like it’s a bad thing.” The thing that should be said for bright line rules: it makes life easier for Congress. It’s make life easier for lower courts, and so [inaudible 36:25], I think, it was a question.
But, yeah, I think you’re right. I don’t think Justice Breyer’s a huge friend of patents or the patent bar, and to be frank, I don’t think – neither is Justice Thomas. If you look at Justice Thomas’ opinions, over time – and that perhaps is not super surprising, so Justice Thomas is perhaps the most libertarian justice of them all, right now, and certainly, a libertarian community is very much of two minds.
There are some people who think “Oh, patents are real property rights, and they are to be treated like any other property right,” and full stop. And others take a view that patents are much more akin to these bad government grants of the – where you gift things to favorite parties, and you prevent the rest of society from doing things, and that, I say we should limit as much as possible. And so perhaps, Justice Thomas has invited a bit of cup number two.
Prof. Dmitry Karshtedt: Yeah. To go back to Kristen’s question. I think there’s definitely some real polity here. Just the fifth vote was lost because Justice Gorsuch does not like the PTAB and likes patents, all right, so Breyer and his two joiners have come in, and maybe – I think Justice Kagan and Justice Sotomayor’s positions are maybe just maybe more general administrative state jurisprudence, but certainly there is that real politic there, right?
Well, this is sort of – maybe the larger implications of this case, right? There are some that hope the whole PTAB system would get taken down. And on the substance of the matter, right, groups, like U.S. Inventor have won, right, on the constitutional grounds, but it’s still – I got an email an hour, and I’m on the list, say, “Well, the Supreme Court affirms this horrible tribunal because it’s still in existence, right?
And so I think the goal here really is – and take down the system by any means necessary. And I have 99 problems with the PTAB, but Appointments Clause ain’t one, right? And I’m not a by-any-means-necessary kind of person, and to the extent that you’d need to distort constitutional doctrine, if you like or dislike patents. So I’m happy that further harm was avoided, and I’m happy that Breyer provided the votes for that. Justice Gorsuch withdrew his vote by probably his intense dislike of the PTAB.
Prof. Kristen Osenga: I think from now on, we should have Dmitry provide the catchphrases for these teleforum because that “99 problems” catchphrase was absolutely brilliant. So we have skirted around a little bit about what this means for the PTAB, and maybe, the answer is not terrible much, but what are the implications that you gentlemen see for both the PTAB going forward, and then also is this going to change administrative law? Is this going to flush out admins? Does this have no bearing on admins because the PTAB is its own weird little world, etc.? So we’ll switch things up. I’ll give it to Dmitry first, and then Greg after.
Prof. Dmitry Karshtedt: I think it will change administrative law to the extent that the part of Edmonds where having a final word on behalf of the agency, or as Justice Scalia’s opinion said, right, “render a final decision on behalf of the United States” become such an important factor. And Chief Justice Roberts’s opinion specifically mentions the Board of Contract Appeals and related bodies potentially in violation of the system.
My government contracts colleagues are already freaking out—not to put a nicer face on it. Maybe, that whole system is invalid. So I think there will be scrutiny. There are definitely many significant numbers of structures where there isn’t that final review by an officer appointed with advice and consent that could create real problems, I think. And I think Edmonds – again, there is wiggle room. It’s not clear what wiggle room there will be.
Maybe, there’s general services administrator, supervising Board of Contract Appeals and certain powers, and maybe, there is an easier fix. So maybe there isn’t, right? I think here the remedy presented itself very clearly, right. The director has reviewed the lower officers at the PTO before in the trademark context. Congress actually passed legislation during the pendency of Arthrex, giving that part to the director.
So it seems like, at least, as a matter of congressional intent or agency structure, it was an easy fix. It’s not so clear that that fix can be made in other agencies, so I think it will affect administrative law. I think it will affect other agencies, and I think the next target is probably the Board of Contracts Appeals where you have that structure. And the other thing I wanted to say in response to Kristen’s question is that it’s not clear delegation of statutory authority, so if, right, that head of the agency delegates authority to judicial officers, within the agencies, who are now appointed with advice and consent. It’s not clear that’s okay.
There’s a case that got litigated in the D.C. Circuit that got to constitutional issues about judicial officers within the USDA that are delegated authority from the secretary but are not themselves appointed, whether you really have to have review by the secretary for there to be constitutional structure of the agency. So there will be a lot more litigation. I think this case opens a lot more, by basically saying, “It wasn’t just loose language in Edmonds. We’re not disavowing Edmonds.” Now, you really have to have some sort of formal review by an officer. So I don’t think it’s just the PTAB because there are agencies like the PTAB, as the chief’s opinion acknowledged.
Prof. Gregory Dolin: So I mostly agree with Dmitry. Like I said, oftentimes, our disagreements are very much at the margins. I think our general outlook is very similar, and just to be clear, by the way, I’m also not a by-any-means-necessary kind of guy. I actually do care deeply about the constitutional structure and not endorsing cockamamie theories simply because I dislike PTAB. And I do dislike PTAB, but I did think that there was Appointments Clause problem.
In terms of its effect on PTAB, I don’t think there’s going to be much. I don’t think the director’s all of a sudden going to just start spending $20 a day to review every single PTAB decision and doing a real “dive into the weeds.” I suspect he’ll basically delegate his authority. I’m a bad tea leaves reader, but I do suspect the delegation’s probably fine, as long as it’s not a one-way ratchet. So as long as basically the director can say, “Okay. Well, I’ve delegated, but now I change my mind. I can basically retake it.”
So as long as the director or any other agency head want to do that, that’s fine. I don’t think that exists. I think the Court would endorse that. So there’s this question about legislation writing and practical reality. I think for most agencies, the practical reality is not going to be that much different, as long as the legislation authorizing those agencies to operation does say that “Look, it has to made by the people who are indeed principal officers,” even if they delegate. For example, Social Security is very common.
So the statute says that the administrator of Social Security makes determinations on disability benefits, but they delegate it to IPO’s counsel, and then they’re delegated to ALJs, but nonetheless, the decision made in the name of and ultimately by the administrator who, of course, is Senate confirmed.
One issue that I would want to highlight—Dmitry brought it up in his opening remarks—about independent agencies and the level of control, and so he’s highlighted, for example, CFC where judges serve, I believe, 15-year terms. They’re an Article I tribunal, but they’re not necessarily responsible to this president and cannot be terminated by a particular president.
And again, it’s one of those issues where it becomes hardware. On one hand, you do need this chain of command, and on the other hand – and there are some situations where you want independence, especially, when you do adjudicatory things, whether it's PTAB, or the CFC, or whether it’s the International Trade Commission, or whether it’s Court of Federal Claims, there are a bunch of the – it’s very much a tough balancing act.
I think what potentially saves it is that, at least, once – sure. The people who currently serve on CFC are not directly responsible and cannot be fired by President Biden. Same thing with CFC, and ITC, etc. But, at least, at some point – the presidency is a continuing thing. The president is not, but the presidency is. And so these individuals who appointed by the power of the chief magistracy and viewed with that authority by being appointed by this chief magistrate and confirmed by our upper chamber. And I think that’s a formal process that’s the solid process, makes it okay that they would render [inaudible 45:30] of the United States.
That having been said, I think truly independent agencies, right, aren’t potentially right for – especially, ones that do things other than adjudication are potential, right, for reexamination, and I think there have been rumblings in the Supreme Court now that this opinion does suggest it or perhaps two independent agencies where the president has almost no control, like, for example, say, FTC, where they don’t really adjudicate. They mostly prosecute. They make rules, etc., but they may or may not survive this current constitutional doctrine.
And I’m not so sure it’s a bad thing. I would agree with the executive agency executing the laws they’re supposed to be adjudicating, that is just floating out there, not subject anybody’s political control. I’m not sure it’s such a great thing. I’m certainly open to arguments, but it’s something that needs, I think, potentially another look.
So, yes, there’s going to be some effect on agencies, but I think it’s yet another one of the piece of the puzzle to try to figure out whether or not this jurisprudence that will start with a new deal where you can have, at least, multiple fourth branch of governments [inaudible 46:41] with the constitutional structure.
Prof. Kristen Osenga: Great. So I do want to remind our participants that if you have any questions, shoot them into the Q&A box or into the chat. We have about 10 to 12 minutes left. While we’re waiting to see if any of the attendees have any questions, I have one more question for you guys. So currently there is no director of the patent office. It hasn’t been named yet by the new administration since Iancu resigned.
There is a not acting director, but a person performing the duties of the director. So quick questions, do you think Hirshfeld can review things in the name of the director at this point? Is that part of his duties that he’s able to perform? And how important do you think this opinion is for who is going to be named director? Whoever wants to take it first. Dmitry, you’re unmuted. We’ll go with you.
Prof. Dmitry Karshtedt: All right. Sure. So to answer the second question first, I think that does raise the stakes for appointments for the appointment of the director for sure, and it’s already been quite a while now since Biden has been in power, and that the fact that the director has not been appointed to some people suggest that the priority is maybe not very high or there’s potentially controversy about who it’s going to be, and I think this just raises the stake and how it can go both ways.
It can either rush the appointment process because the director will have this increased power that the Supreme Court gave him or her, right, or it would just create more controversy because the stakes are so much higher. I’ll say Drew Hirshfeld, right, there’s a lively debate in IP profs thread, and I think one of the exceptions to the advice and consent requirement is an acting or the person performing the duties of, and the Thomas opinion cites a case called United States v. Eaton, right, which says that, right, you could have a subordinate officer called a vice-consul to be charged with the duty of temporarily performing the functions of the consul office, right.
It’s still okay, right? And I think it sounds like acting—at least, under this Eaton precedent—the acting director can constitutionally be that final word for the agency, which, of course, is an exception to the role of Edmond in a way, right, but I think it’s an exception that’s been baked in for a long time, and it’s actually one of the precedents that Thomas relies upon.
So I think it seems okay for Hirshfeld to be carrying it out. At the same time, we do want a permanent person in power at the PTAB, right? I think the Obama administration was criticized for replacing Kappos, after Kappos stepped down, and the Michelle Lee appointment, it took quite a while to happen. I think it does become important for the director to set policy.
Of course, the other thing a director can do is American Axle case, Section 101 is now on the CBSG, and the director often meets with the Solicitor General to discuss the PTOs [inaudible 49:44] again, might have a temporary person in charge. I think it creates high stakes, and I think just from administrating our government perspective, the new director should be appointed as soon as possible.
Prof. Gregory Dolin: So I agree with Dmitry on the Eaton portion. In fact, it wasn’t just Justice Thomas that just pulled up that thing, and Justice Roberts -- the majority opinion, endorses, so that’s, at least, five-justice majority says that they were officers that said there would be limited power under special temporary condition, meaning those people who are acting, right. And he specifically says United States v. Eaton was talking about exercising function of a principal officer on an acting basis.
So I think that part is okay. I think it will be a little crazy given how many people we need to go to a Senate confirmation to say well, unless the office is empty, even on a temporary basis, then basically it has to shut down. So I think that -- and the precedent seems to support it.
On selection of a Patent Office director, I guess, I maybe moderately disagree or slightly disagree with Dmitry. I don’t think it doesn’t matter, but I think it matters marginally. Because to the extent -- as a placeholder terms, let’s [inaudible 50:56] that Director Iancu is more pro-patent than director Michelle Lee. And I know people will debate those terms and say, well, what does it mean? But just for purpose of placeholder terms, right?
So let’s assume that's the dichotomy. So they were selected based on the views of the patent regime and how PTAB and general patent officers operate by their respective presidents, even before they had this power to review decisions. Well, except, I don’t suspect a patent officer actually will review any of these decisions directly. Maybe, if they do, maybe, they’ll review one, right? I don’t think it’s going to be any different than what they’re doing now with the Precedential Opinions Panel.
So to the extent that President Biden has a particular vision of patent world and what it ought to be like or world competition, I think the person who would be more willing to get involved in nitty gritty adjudication should probably be getting involved with the same view that you would've been bringing to the office. Even if you couldn't get involved, you should be bringing it through rulemaking and through selection of panels, etc.
So I don’t think it doesn’t matter at all, but I think, ultimately, the difference is fairly marginal. If for no other reason than the government, in this case, has said time and time again that “Look, the reason why these APJs are not principal officers is because don’t worry the director has a lot of authority.” And if that’s true, right, that adding just a little bit more authority I don’t think ought to really make a difference as to from which column. Like I said, there’d be more Michelle Lee, and there’d be more like David Kappos; there’d be more Andrei Iancu, like President Biden will pick.
Prof. Kristen Osenga: Great. So our time is winding down. We have no questions, so I guess what I’m going to ask from the gentlemen is, you have a minute or two to get in your last words, and we’ll start with Greg.
Prof. Gregory Dolin: Thank you. So like I said, I’ll finish where I started, so it’s always a fascinating discussion. It’s always a pleasure to go head-to-head against Dmitry, and for no other reason -- even though I may remain unconvinced, but, at least, I always learn something.
And so I will say that, ultimately, this has left me completely unsatisfied because it does put the -- perhaps advance the ball forward a little bit, for those of us who are of the view that the administrative state needs a bit more pruning, at least, into this constitutional structure. It needs more be brought back within the tri-party system of government. And I’m not going talking about what the justices should or should not do, but how to be structured.
So it does move the ball forward a little bit, but it ultimately, in the last moments, sort of chickens out and says, “Look, the system is almost fine the way it is. We just got to make this one change. It’s really not going to make any difference on the ground and 99.9 percent of the time. It’s not more. And that everything is going to be fine.”
Although, like I said, formalism is not a bad thing. And so if Congress had written the statute that way, I think it will be fine. What concerns me is this tendency, by the Court—as Justice Gorsuch [inaudible 54:04] in the dissent—that tries to rewrite the statute, tries to -- well, the Court, on one hand, tells Congress, “Look, you’re delegating perhaps too much power to people who are not properly appointed.” And in the very same breath, says, “Okay, but we going to take congressional power and rewrite the statute ourselves.”
And that’s a little disconcerting. And so my final word is, like I said, just like Justice Gorsuch, I wish the Court would've gotten to a different decision in Oil States making this decision unnecessary. I think it would've been cleaner. Since they didn’t get through it in Oil States, I think that’s why we are a bit in this morass. But I guess more cases are coming up, and I think the battle is never -- the war is never over, just we’re moving on from one battle to the other.
Prof. Kristen Osenga: Dmitry.
Prof. Dmitry Karshtedt: Yeah. I’ll second the point, and it’s always a pleasure to discuss things with Greg, and Greg is always in good faith on legal arguments, but I think a part of not -- I think not everyone is, and for some, I think, the dislike of the PTAB has led to some of this litigation. And that’s why this opinion -- so for, maybe, Appointments Clause purposes, those who want to control agency structure, it’s a good result, but is a disappointment if your end-all, right, is to make part of the agency go away.
But in terms of on the substantive point, right, I was -- so the Court’s role and discussions of judicial activism, and someone, I was reading some old Federalist Society documents in preparation for this, and Robert Bork, I think, has a really interesting quote, "Given the complexity and opacity of social phenomena, cases will raise in which the court is unsure. If so, it must decide in favor of governmental action, since the danger of being wrong seems right, the equal in either direction, the court has no basis for setting aside political judgment."
Well, the Court has set aside political judgment in this case, and I think it’s somewhat disappointing, right? And I think Thomas is the one justice who doesn’t like constitutionalizing everything, whether it’s on the so-called ideological left or right, whether it’s even in the between issues, like constitutionalizing our first torte law for the First Amendment, right, dignitary towards punitive damages, and so on. And I think he’s true to that view in the end, and maybe, the majority isn’t necessarily.
And so, right, because it’s not clear of the accountability issue, that Greg mentioned, right, is it accountability for bad nominations, for bad decisions? There’s a lot of slippage in that opinion. I think I am unsure if that’s wrong and the founders would've disliked this structure, and I think if you are unsure, I think it’s better to leave things be. But the Court has not, but further harm was avoided, so maybe, nothing should be too disappointed about in the end.
Prof. Kristen Osenga: Okay. And with that, I want to thank our attendees for being here today, and thanks to my friends, Greg and Dmitry, for a very great discussion and the tagline “99 problems with the PTAB, and the Appointments Clause isn’t one of them.” So Nick, back to you.
Nick Marr: Well, thanks very much. Thanks for a great discussion. Of course, thank you to our panelists and to our moderator. Kristen, thanks very much for your time and the benefit of your expertise today, this morning, or this night, as the case may be for Greg, and thank you to our audience for calling in. Usually, we have good questions, but I suppose we covered everything.
As always, we welcome your feedback by email at email@example.com. Also, check your email and our website for announcements about upcoming Zoom events like this one, especially, as we get towards the end of the term. We’re covering all of these cases this week, next week, and possibly the week after. But until that next event, thanks 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 fedsoc.org.